U.S. Markets open in 1 hr 11 mins
  • S&P Futures

    3,773.75
    -15.75 (-0.42%)
     
  • Dow Futures

    30,661.00
    -120.00 (-0.39%)
     
  • Nasdaq Futures

    11,464.25
    -65.25 (-0.57%)
     
  • Russell 2000 Futures

    1,699.70
    -8.30 (-0.49%)
     
  • Crude Oil

    108.64
    +2.88 (+2.72%)
     
  • Gold

    1,788.20
    -19.10 (-1.06%)
     
  • Silver

    19.56
    -0.79 (-3.89%)
     
  • EUR/USD

    1.0425
    -0.0058 (-0.5525%)
     
  • 10-Yr Bond

    2.9720
    0.0000 (0.00%)
     
  • Vix

    28.70
    +0.54 (+1.92%)
     
  • GBP/USD

    1.2030
    -0.0146 (-1.1957%)
     
  • USD/JPY

    135.1920
    -0.5360 (-0.3949%)
     
  • BTC-USD

    19,227.24
    +143.75 (+0.75%)
     
  • CMC Crypto 200

    413.41
    -18.05 (-4.18%)
     
  • FTSE 100

    7,151.81
    -17.47 (-0.24%)
     
  • Nikkei 225

    25,935.62
    -457.42 (-1.73%)
     

The three-year decline in earnings for Air Lease NYSE:AL) isn't encouraging, but shareholders are still up 22% over that period

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Low-cost index funds make it easy to achieve average market returns. But in any diversified portfolio of stocks, you'll see some that fall short of the average. For example, the Air Lease Corporation (NYSE:AL) share price return of 15% over three years lags the market return in the same period. Unfortunately, the share price has fallen 2.8% over twelve months.

Although Air Lease has shed US$320m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Air Lease

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, Air Lease actually saw its earnings per share (EPS) drop 26% per year.

The strong decline in earnings per share suggests the market isn't using EPS to judge the company. 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.

Languishing at just 1.8%, we doubt the dividend is doing much to prop up the share price. It could be that the revenue growth of 6.0% per year is viewed as evidence that Air Lease is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

Take a more thorough look at Air Lease's financial health with this free 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Air Lease the TSR over the last 3 years was 22%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Air Lease shareholders are down 1.3% for the year (even including dividends), but the market itself is up 8.1%. 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. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Take risks, for example - Air Lease has 3 warning signs (and 1 which is concerning) we think you should know about.

We will like Air Lease better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.