Can You Imagine How Chuffed American Water Works Company’s Shareholders Feel About Its 124% Share Price Gain?

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The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100% For instance, the price of American Water Works Company, Inc. (NYSE:AWK) stock is up an impressive 124% over the last five years. In the last week the share price is up 2.4%.

View our latest analysis for American Water Works Company

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 flawed but reasonable way to assess how sentiment around a company has changed, is to compare the earnings per share (EPS) with the share price.

Over half a decade, American Water Works Company managed to grow its earnings per share at 8.6% a year. This EPS growth is slower than the share price growth of 17% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that’s hardly shocking given the track record of growth.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NYSE:AWK Past and Future Earnings, February 22nd 2019
NYSE:AWK Past and Future Earnings, February 22nd 2019

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on American Water Works Company’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, American Water Works Company’s TSR for the last 5 years was 150%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It’s good to see that American Water Works Company has rewarded shareholders with a total shareholder return of 27% in the last twelve months. That’s including the dividend. That’s better than the annualised return of 20% 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of American Water Works Company by clicking this link.

American Water Works Company is not the only stock that insiders are buying. 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.