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Did You Miss Allied Motion Technologies's (NASDAQ:AMOT) 86% Share Price Gain?

Simply Wall St

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Allied Motion Technologies Inc. (NASDAQ:AMOT), which is up 86%, over three years, soundly beating the market return of 29% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 8.4% , including dividends .

Check out our latest analysis for Allied Motion Technologies

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Allied Motion Technologies 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 23% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

NasdaqGM:AMOT Past and Future Earnings, February 26th 2020

We know that Allied Motion Technologies has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Allied Motion Technologies will grow revenue in the future.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Allied Motion Technologies's total shareholder return (TSR) and its 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. Dividends have been really beneficial for Allied Motion Technologies shareholders, and that cash payout contributed to why its TSR of 88%, over the last 3 years, is better than the share price return.

A Different Perspective

Allied Motion Technologies shareholders are up 8.4% for the year (even including dividends) . Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 11% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Allied Motion Technologies you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.

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.

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. Thank you for reading.