Even though Adecoagro (NYSE:AGRO) has lost US$60m market cap in last 7 days, shareholders are still up 85% over 1 year
If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Adecoagro S.A. (NYSE:AGRO) share price is up 85% in the last 1 year, clearly besting the market return of around 33% (not including dividends). So that should have shareholders smiling. However, the longer term returns haven't been so impressive, with the stock up just 19% in the last three years.
In light of the stock dropping 5.4% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.
View our latest analysis for Adecoagro
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 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).
During the last year Adecoagro grew its earnings per share, moving from a loss to a profit.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
However the year on year revenue growth of 13% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that Adecoagro has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Adecoagro stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that Adecoagro has rewarded shareholders with a total shareholder return of 85% in the last twelve months. Notably the five-year annualised TSR loss of 3% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Adecoagro better, we need to consider many other factors. Take risks, for example - Adecoagro has 2 warning signs (and 1 which is potentially serious) we think you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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. 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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