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Buying a low-cost index fund will get you the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. That's what has happened with the Astronics Corporation (NASDAQ:ATRO) share price. It's up 25% over three years, but that is below the market return. Zooming in, the stock is up just 2.4% in the last year.
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 three years of share price growth, Astronics actually saw its earnings per share (EPS) drop 10% per year. This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
It may well be that Astronics revenue growth rate of 3.9% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
We know that Astronics has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Astronics will earn in the future (free profit forecasts).
A Different Perspective
Astronics provided a TSR of 2.4% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 2.0% per year over five year. This suggests the company might be improving over time. Is Astronics cheap compared to other companies? These 3 valuation measures might help you decide.
Of course Astronics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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 firstname.lastname@example.org. 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.