Yahoo Finance AmerisourceBergen's (NYSE:ABC) five-year total shareholder returns outpace the underlying earnings growth
AmerisourceBergen Corporation (NYSE:ABC) shareholders might be concerned after seeing the share price drop 12% in the last quarter. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 77%, less than the market return of 83%.
In light of the stock dropping 4.3% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
Check out our latest analysis for AmerisourceBergen
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, AmerisourceBergen moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that AmerisourceBergen has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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. As it happens, AmerisourceBergen's TSR for the last 5 years was 92%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that AmerisourceBergen shareholders have received a total shareholder return of 16% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 2 warning signs for AmerisourceBergen that you should be aware of before investing here.
We will like AmerisourceBergen 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.
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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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