Investors in Atlas (NYSE:ATCO) have made a strong return of 183% over the past three years
It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. To wit, the Atlas Corp. (NYSE:ATCO) share price has flown 146% in the last three years. How nice for those who held the stock! This is largely because of teh acquisition offer that shareholders accepted which gave a bit of a kick to the share price!
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Atlas
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Atlas actually saw its earnings per share (EPS) drop 0.3% per year.
Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Atlas at the moment. So other metrics may hold the key to understanding what is influencing investors.
It could be that the revenue growth of 12% per year is viewed as evidence that Atlas is growing. 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.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Atlas 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 Atlas 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. In the case of Atlas, it has a TSR of 183% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Atlas shareholders have received a total shareholder return of 5.7% over the last year. That's including the dividend. Having said that, the five-year TSR of 25% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Even so, be aware that Atlas is showing 4 warning signs in our investment analysis , and 1 of those is concerning...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.
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