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Should Altice USA (NYSE:ATUS) Be Disappointed With Their 74% Profit?

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Simply Wall St
·4 min read
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By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Altice USA, Inc. (NYSE:ATUS), which is up 74%, over three years, soundly beating the market return of 44% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 30%.

View our latest analysis for Altice USA

We don't think that Altice USA's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over the last three years Altice USA has grown its revenue at 2.3% annually. Considering the company is losing money, we think that rate of revenue growth is uninspiring. The modest growth is probably broadly reflected in the share price, which is up 20%, per year over 3 years. The real question is when the business will generate profits, and how quickly they will grow. Given the market doesn't seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Altice USA stock, you should check out this free report showing analyst profit forecasts.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Altice USA's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Altice USA's TSR, at 93% is higher than its share price return of 74%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

It's nice to see that Altice USA shareholders have gained 30% (in total) over the last year. So this year's TSR was actually better than the three-year TSR (annualized) of 25%. The improving returns to shareholders suggests the stock is becoming more popular with time. 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 for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Altice USA (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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 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.

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