ArcBest's (NASDAQ:ARCB) 24% CAGR outpaced the company's earnings growth over the same five-year period

By
Simply Wall St
Published
April 20, 2022
NasdaqGS:ARCB
Source: Shutterstock

ArcBest Corporation (NASDAQ:ARCB) shareholders have seen the share price descend 21% over the month. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 175% in that time. To some, the recent pullback wouldn't be surprising after such a fast rise. Of course, that doesn't necessarily mean it's cheap now.

Since the stock has added US$121m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for ArcBest

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Over half a decade, ArcBest managed to grow its earnings per share at 65% a year. This EPS growth is higher than the 22% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.46.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NasdaqGS:ARCB Earnings Per Share Growth April 20th 2022

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on ArcBest's earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of ArcBest, it has a TSR of 188% 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

It's nice to see that ArcBest shareholders have received a total shareholder return of 5.1% over the last year. That's including the dividend. However, that falls short of the 24% TSR per annum it has made for shareholders, each year, over five years. 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 ArcBest better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for ArcBest you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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

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