Even though Adecoagro (NYSE:AGRO) has lost US$94m market cap in last 7 days, shareholders are still up 132% over 3 years
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Adecoagro S.A. (NYSE:AGRO) share price has flown 120% in the last three years. That sort of return is as solid as granite. On top of that, the share price is up 12% in about a quarter.
In light of the stock dropping 7.6% 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 three-year return.
View our latest analysis for Adecoagro
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Adecoagro became profitable within the last three years. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Adecoagro has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Adecoagro stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Adecoagro, it has a TSR of 132% for the last 3 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 Adecoagro shareholders have received a total shareholder return of 30% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 9%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Adecoagro (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
But note: Adecoagro may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
