If You Had Bought Auckland International Airport (NZSE:AIA) Shares Five Years Ago You'd Have Earned 34% Returns

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Auckland International Airport Limited (NZSE:AIA) share price is up 34% in the last five years, that's less than the market return. Unfortunately the share price is down 14% in the last year.

View our latest analysis for Auckland International Airport

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Auckland International Airport's earnings per share are down 4.2% per year, despite strong share price performance over five years.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

On the other hand, Auckland International Airport's revenue is growing nicely, at a compound rate of 6.1% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Auckland International Airport stock, you should check out this free report showing analyst profit forecasts.

What about the Total Shareholder Return (TSR)?

We've already covered Auckland International Airport's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Auckland International Airport shareholders, and that cash payout contributed to why its TSR of 54%, over the last 5 years, is better than the share price return.

A Different Perspective

While the broader market gained around 14% in the last year, Auckland International Airport shareholders lost 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Auckland International Airport better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Auckland International Airport you should know about.

Auckland International Airport is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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This article by Simply Wall St is general in nature. 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.
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