It’s easy to feel disappointed if you buy a stock that goes down. But in the short term the market is a voting machine, and the share price movements may not reflect the underlying business performance. The ATA Inc. (NASDAQ:ATAI) is down 78% over a year, but the total shareholder return is 101% once you include the dividend. And that total return actually beats the market return of 0.9%. Even if you look out three years, the returns are still disappointing, with the share price down (the share price is down 77%) in that time. It’s up 3.5% in the last seven days.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 year ATA grew its earnings per share, moving from a loss to a profit. We’re surprised that the share price is lower given that improvement. If the improved profitability is a sign of things to come, then right now may prove the perfect time to pop this stock on your watchlist.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into ATA’s key metrics by checking this interactive graph of ATA’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between ATA’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) and any discounted capital raisings offered to shareholders. Its history of dividend payouts mean that ATA’s TSR of 101% over the last year is better than the share price return.
A Different Perspective
We’re pleased to report that ATA shareholders have received a total shareholder return of 101% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 25% per year), it would seem that the stock’s performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. You could get a better understanding of ATA’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
We will like ATA 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.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.