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Introducing Astec Industries (NASDAQ:ASTE), The Stock That Dropped 41% In The Last Three Years

Simply Wall St

As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Astec Industries, Inc. (NASDAQ:ASTE) shareholders have had that experience, with the share price dropping 41% in three years, versus a market return of about 30%. And the share price decline continued over the last week, dropping some 16%. However, this move may have been influenced by the broader market, which fell 11% in that time.

Check out our latest analysis for Astec Industries

Astec Industries wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over three years, Astec Industries grew revenue at 2.0% per year. That's not a very high growth rate considering it doesn't make profits. Indeed, the stock dropped 16% over the last three years. If revenue growth accelerates, we might see the share price bounce. But ultimately the key will be whether the company can become profitability.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NasdaqGS:ASTE Income Statement, March 1st 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Astec Industries

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Astec Industries's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Astec Industries shareholders, and that cash payout explains why its total shareholder loss of 39%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Investors in Astec Industries had a tough year, with a total loss of 4.6% (including dividends) , against a market gain of about 6.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.2% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality business. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Astec Industries is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.

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.