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Did Algonquin Power & Utilities's (TSE:AQN) Share Price Deserve to Gain 94%?

Simply Wall St

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Algonquin Power & Utilities share price has climbed 94% in five years, easily topping the market return of 9.1% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 37% in the last year , including dividends .

Check out our latest analysis for Algonquin Power & Utilities

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Over half a decade, Algonquin Power & Utilities managed to grow its earnings per share at 21% a year. This EPS growth is higher than the 14% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

TSX:AQN Past and Future Earnings, November 10th 2019

It is of course excellent to see how Algonquin Power & Utilities has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Algonquin Power & Utilities stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Algonquin Power & Utilities, it has a TSR of 146% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Algonquin Power & Utilities shareholders have received a total shareholder return of 37% over one year. That's including the dividend. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. If you would like to research Algonquin Power & Utilities in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

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 CA 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 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. Thank you for reading.