Quanta Services (NYSE:PWR) shareholders have earned a 48% CAGR over the last five years

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. For example, the Quanta Services, Inc. (NYSE:PWR) share price is up a whopping 603% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. In the last week shares have slid back 2.9%. It really delights us to see such great share price performance for investors.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Quanta Services

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. 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, Quanta Services managed to grow its earnings per share at 16% a year. This EPS growth is slower than the share price growth of 48% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 52.03.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Quanta Services has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Quanta Services, it has a TSR of 612% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Quanta Services shareholders have received a total shareholder return of 40% over one year. That's including the dividend. However, that falls short of the 48% TSR per annum it has made for shareholders, each year, over five years. 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. For example, we've discovered 1 warning sign for Quanta Services that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com