Yahoo Finance Quanta Services (NYSE:PWR) jumps 8.4% this week, though earnings growth is still tracking behind five-year shareholder returns
For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the Quanta Services, Inc. (NYSE:PWR) share price is up a whopping 674% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. It's even up 8.4% in the last week. We love happy stories like this one. The company should be really proud of that performance!
Since the stock has added US$3.0b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
View our latest analysis for Quanta Services
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 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.
During five years of share price growth, Quanta Services achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is slower than the share price growth of 51% 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. This optimism is visible in its fairly high P/E ratio of 48.40.
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? Check if analysts think Quanta Services will grow revenue in the future.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Quanta Services' TSR for the last 5 years was 685%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Quanta Services has rewarded shareholders with a total shareholder return of 28% in the last twelve months. That's including the dividend. Having said that, the five-year TSR of 51% a year, is even better. 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. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Quanta Services you should know about.
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.
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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.
