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What Type Of Returns Would Allegheny Technologies'(NYSE:ATI) Shareholders Have Earned If They Purchased Their SharesThree Years Ago?

Simply Wall St
·3 min read

Allegheny Technologies Incorporated (NYSE:ATI) shareholders should be happy to see the share price up 21% in the last week. Meanwhile over the last three years the stock has dropped hard. Indeed, the share price is down a tragic 58% in the last three years. So the improvement may be a real relief to some. After all, could be that the fall was overdone.

See our latest analysis for Allegheny Technologies

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Allegheny Technologies moved from a loss to profitability. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics may better explain the share price move.

The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Allegheny Technologies shareholders are down 57% for the year, but the market itself is up 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. We realise that Baron Rothschild 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. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Allegheny Technologies you should know about.

But note: Allegheny Technologies may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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. 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.

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