Is Allegion’s (NYSE:ALLE) 116% Share Price Increase Well Justified?

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. Long term Allegion plc (NYSE:ALLE) shareholders would be well aware of this, since the stock is up 116% in five years. On top of that, the share price is up 23% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

View our latest analysis for Allegion

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Allegion managed to grow its earnings per share at 23% a year. The EPS growth is more impressive than the yearly share price gain of 17% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

You can see how EPS has changed over time in the image below.

NYSE:ALLE Past and Future Earnings, November 15th 2019
NYSE:ALLE Past and Future Earnings, November 15th 2019

We know that Allegion has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Allegion’s TSR for the last 5 years was 125%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It’s good to see that Allegion has rewarded shareholders with a total shareholder return of 33% in the last twelve months. And that does include the dividend. That’s better than the annualised return of 18% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on Allegion it might be wise to click here to see if insiders have been buying or selling shares.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.