ArcBest's (NASDAQ:ARCB) five-year earnings growth trails the incredible shareholder returns

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. One great example is ArcBest Corporation (NASDAQ:ARCB) which saw its share price drive 299% higher over five years. Also pleasing for shareholders was the 12% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 10% in 90 days).

The past week has proven to be lucrative for ArcBest investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for ArcBest

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, ArcBest managed to grow its earnings per share at 28% a year. So the EPS growth rate is rather close to the annualized share price gain of 32% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on ArcBest's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, ArcBest's TSR for the last 5 years was 311%, 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

ArcBest shareholders are up 1.9% for the year (even including dividends). But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 33% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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 2 warning signs for ArcBest that you should be aware of before investing here.

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