Investing in Arcosa (NYSE:ACA) three years ago would have delivered you a 24% gain

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Arcosa, Inc. (NYSE:ACA) share price is up 23% in the last three years, clearly besting the market return of around 17% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 6.9% in the last year , including dividends .

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Arcosa

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Arcosa actually saw its earnings per share (EPS) drop 5.8% per year.

So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.

The modest 0.4% dividend yield is unlikely to be propping up the share price. It could be that the revenue growth of 8.8% per year is viewed as evidence that Arcosa is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth

We know that Arcosa has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Arcosa will earn in the future (free profit forecasts).

A Different Perspective

We're pleased to report that Arcosa rewarded shareholders with a total shareholder return of 6.9% over the last year. And yes, that does include the dividend. The TSR has been even better over three years, coming in at 7% per year. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Arcosa you should be aware of, and 1 of them is a bit concerning.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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