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38% earnings growth over 1 year has not materialized into gains for Lamar Advertising (NASDAQ:LAMR) shareholders over that period

You can invest in an index fund if you want to make sure your returns approximately match the overall market. In contrast individual stocks will provide a wide range of possible returns, and may fall short. For example, that's what happened with Lamar Advertising Company (NASDAQ:LAMR) over the last year - it's share price is down 28% versus a market decline of 22%. On the other hand, the stock is actually up 3.3% over three years. More recently, the share price has dropped a further 16% in a month. We do note, however, that the broader market is down 13% in that period, and this may have weighed on the share price.

If the past week is anything to go by, investor sentiment for Lamar Advertising isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Lamar Advertising

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

Even though the Lamar Advertising share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.

We don't see any weakness in the Lamar Advertising's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

We know that Lamar Advertising 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 Lamar Advertising will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Lamar Advertising, it has a TSR of -25% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 22% in the twelve months, Lamar Advertising shareholders did even worse, losing 25% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Lamar Advertising you should know about.

We will like Lamar Advertising better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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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