Amalgamated Financial (NASDAQ:AMAL) shareholders have earned a 22% CAGR over the last three years
Amalgamated Financial Corp. (NASDAQ:AMAL) shareholders might be concerned after seeing the share price drop 24% in the last quarter. But don't let that distract from the very nice return generated over three years. To wit, the share price did better than an index fund, climbing 69% during that period.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Amalgamated Financial
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Amalgamated Financial was able to grow its EPS at 21% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 19% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Amalgamated Financial has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Amalgamated Financial's TSR for the last 3 years was 80%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We can sympathize with Amalgamated Financial about their 0.8% loss for the year ( including dividends), but the silver lining is that the broader market return was worse, at around -3.6%. Longer term investors wouldn't be so upset, since they would have made 22%, each year, over three years. Given the three year returns are better than the return over the last year, it might be that the broader market has weighed on the stock recently. It's always interesting to track share price performance over the longer term. But to understand Amalgamated Financial better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Amalgamated Financial , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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