U.S. markets open in 3 hours 44 minutes
  • S&P Futures

    3,681.75
    -27.25 (-0.73%)
     
  • Dow Futures

    29,461.00
    -208.00 (-0.70%)
     
  • Nasdaq Futures

    11,312.25
    -64.50 (-0.57%)
     
  • Russell 2000 Futures

    1,670.80
    -15.30 (-0.91%)
     
  • Crude Oil

    78.24
    -0.50 (-0.64%)
     
  • Gold

    1,652.10
    -3.50 (-0.21%)
     
  • Silver

    18.64
    -0.27 (-1.45%)
     
  • EUR/USD

    0.9658
    -0.0030 (-0.31%)
     
  • 10-Yr Bond

    3.6970
    0.0000 (0.00%)
     
  • Vix

    32.35
    +5.00 (+18.28%)
     
  • GBP/USD

    1.0713
    -0.0144 (-1.33%)
     
  • USD/JPY

    144.0300
    +0.7100 (+0.50%)
     
  • BTC-USD

    19,131.16
    +75.22 (+0.39%)
     
  • CMC Crypto 200

    437.97
    -6.56 (-1.48%)
     
  • FTSE 100

    6,988.03
    -30.57 (-0.44%)
     
  • Nikkei 225

    26,431.55
    -722.28 (-2.66%)
     

Algonquin Power & Utilities (TSE:AQN) shareholders have earned a 11% CAGR over the last five years

·3 min read

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Algonquin Power & Utilities share price has climbed 34% in five years, easily topping the market return of 27% (ignoring dividends).

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Algonquin Power & Utilities

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years of share price growth, Algonquin Power & Utilities achieved compound earnings per share (EPS) growth of 12% per year. This EPS growth is higher than the 6% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

This free interactive report on Algonquin Power & Utilities' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Algonquin Power & Utilities, it has a TSR of 69% for the last 5 years. 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

We regret to report that Algonquin Power & Utilities shareholders are down 3.8% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.1%. 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 11% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Algonquin Power & Utilities better, we need to consider many other factors. To that end, you should learn about the 5 warning signs we've spotted with Algonquin Power & Utilities (including 2 which don't sit too well with us) .

But note: Algonquin Power & Utilities may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here