Avax (ATH:AVAX) delivers shareholders massive 48% CAGR over 5 years, surging 12% in the last week alone

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the Avax S.A. (ATH:AVAX) share price. It's 567% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 24% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 15% in 90 days). Anyone who held for that rewarding ride would probably be keen to talk about it.

The past week has proven to be lucrative for Avax investors, so let's see if fundamentals drove the company's five-year performance.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last half decade, Avax became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Avax share price is up 244% in the last three years. Meanwhile, EPS is up 293% per year. This EPS growth is higher than the 51% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Avax has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Avax's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Avax's TSR for the last 5 years was 621%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Avax has rewarded shareholders with a total shareholder return of 86% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 48% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Avax (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Greek exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.