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As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Advanced Emissions Solutions, Inc. (NASDAQ:ADES) shareholders have had that experience, with the share price dropping 46% in three years, versus a market return of about 55%.
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.
Over the three years that the share price declined, Advanced Emissions Solutions' earnings per share (EPS) dropped significantly, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But it's safe to say we'd generally expect the share price to be lower as a result!
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Advanced Emissions Solutions' key metrics by checking this interactive graph of Advanced Emissions Solutions's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Advanced Emissions Solutions' total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Advanced Emissions Solutions' TSR of was a loss of 36% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Investors in Advanced Emissions Solutions had a tough year, with a total loss of 13%, against a market gain of about 74%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 4% 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. It's always interesting to track share price performance over the longer term. But to understand Advanced Emissions Solutions better, we need to consider many other factors. Take risks, for example - Advanced Emissions Solutions has 1 warning sign we think you should be aware of.
We will like Advanced Emissions Solutions 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.
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.
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