Yahoo Finance Wish You Were Here: How a2 Milk (NZSE:ATM) Shareholders Made A Stonking Gain Of 3163%
Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held The a2 Milk Company Limited (NZSE:ATM) shares for the last five years, while they gained 3163%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 14% over the last quarter.
Anyone who held for that rewarding ride would probably be keen to talk about it.
View our latest analysis for a2 Milk
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, a2 Milk moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the a2 Milk share price is up 450% in the last three years. During the same period, EPS grew by 73% each year. This EPS growth is remarkably close to the 77% average annual increase in the share price (over three years, again). So one might argue that investor sentiment towards the stock hss not changed much over time. Rather, the share price has approximately tracked EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on a2 Milk's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that a2 Milk has rewarded shareholders with a total shareholder return of 19% in the last twelve months. However, the TSR over five years, coming in at 101% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Before spending more time on a2 Milk it might be wise to click here to see if insiders have been buying or selling shares.
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 NZ exchanges.
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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. 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. Thank you for reading.
