Did Arconic's (NYSE:ARNC) Share Price Deserve to Gain 50%?
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If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Arconic Inc. (NYSE:ARNC) share price is 50% higher than it was a year ago, much better than the market return of around 4.7% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! We'll need to follow Arconic for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
See our latest analysis for Arconic
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 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).
During the last year Arconic grew its earnings per share, moving from a loss to a profit. When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
We doubt the modest 0.3% dividend yield is doing much to support the share price. However the year on year revenue growth of 6.8% would help. We do see some companies suppress earnings in order to accelerate revenue growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Arconic shareholders should be happy with the total gain of 51% over the last twelve months, including dividends. And the share price momentum remains respectable, with a gain of 26% in the last three months. This suggests the company is continuing to win over new investors. 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 Arconic by clicking this link.
Arconic 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.
