Acadian Asset Management's (NYSE:AAMI) earnings growth rate lags the 32% CAGR delivered to shareholders

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Acadian Asset Management Inc. (NYSE:AAMI) stock is up an impressive 292% over the last five years. But it's down 9.0% in the last week. However, this might be related to the overall market decline of 5.6% in a week.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Acadian Asset Management achieved compound earnings per share (EPS) growth of 2.1% per year. This EPS growth is lower than the 31% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

It is of course excellent to see how Acadian Asset Management has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Acadian Asset Management stock, you should check out this FREE detailed report on its balance sheet .

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Acadian Asset Management's TSR for the last 5 years was 296%, 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

We're pleased to report that Acadian Asset Management shareholders have received a total shareholder return of 6.1% over one year. That's including the dividend. However, the TSR over five years, coming in at 32% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Acadian Asset Management better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Acadian Asset Management (including 1 which can't be ignored) .

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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 American 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.