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ADTRAN, Inc. (NASDAQ:ADTN) shareholders might be concerned after seeing the share price drop 17% in the last month. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. Looking at the full year, the company has easily bested an index fund by gaining 82%.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
ADTRAN went from making a loss to reporting a profit, in the last year.
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.
We doubt the modest 1.9% dividend yield is doing much to support the share price. 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.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that ADTRAN 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 ADTRAN will earn in the future (free profit forecasts).
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for ADTRAN the TSR over the last 1 year was 86%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that ADTRAN has rewarded shareholders with a total shareholder return of 86% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand ADTRAN better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with ADTRAN .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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