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The Aeroflot - Russian Airlines (MCX:AFLT) Share Price Has Gained 201%, So Why Not Pay It Some Attention?

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Public Joint Stock Company Aeroflot - Russian Airlines (MCX:AFLT) which saw its share price drive 201% higher over five years. Also pleasing for shareholders was the 12% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 5.1% in 90 days).

Check out our latest analysis for Aeroflot - Russian Airlines

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last half decade, Aeroflot - Russian Airlines became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. 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 Aeroflot - Russian Airlines share price is down 30% in the last three years. Meanwhile, EPS is up 5.6% per year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -11% a year for three years.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

MISX:AFLT Past and Future Earnings, February 20th 2020
MISX:AFLT Past and Future Earnings, February 20th 2020

We know that Aeroflot - Russian Airlines has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Aeroflot - Russian Airlines will grow revenue in the future.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Aeroflot - Russian Airlines the TSR over the last 5 years was 269%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Aeroflot - Russian Airlines provided a TSR of 20% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 30% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Be aware that Aeroflot - Russian Airlines is showing 1 warning sign in our investment analysis , you should know about...

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 RU exchanges.

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.

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. Thank you for reading.

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