Did Acer Cyber Security's (GTSM:6690) Share Price Deserve to Gain 39%?

By
Simply Wall St
Published
January 08, 2021

While Acer Cyber Security Inc. (GTSM:6690) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 11% in the last quarter. But that doesn't change the reality that over twelve months the stock has done really well. To wit, it had solidly beat the market, up 39%.

See our latest analysis for Acer Cyber Security

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During the last year, Acer Cyber Security actually saw its earnings per share drop 15%.

This means it's unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

However the year on year revenue growth of 21% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

GTSM:6690 Earnings and Revenue Growth January 8th 2021

This free interactive report on Acer Cyber Security's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Acer Cyber Security, it has a TSR of 41% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Acer Cyber Security boasts a total shareholder return of 41% for the last year (that includes the dividends) . Unfortunately the share price is down 11% over the last quarter. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Acer Cyber Security (of which 1 is a bit concerning!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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