Yahoo Finance Did You Miss Algonquin Power & Utilities’s (TSE:AQN) 92% Share Price Gain?
Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Algonquin Power & Utilities Corp. (TSE:AQN) share price is up 92% in the last 5 years, clearly besting than the market return of around 5.2% (ignoring dividends). On the other hand, the more recent gains haven’t been so impressive, with shareholders gaining just 23%, including dividends.
See our latest analysis for Algonquin Power & Utilities
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 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.
During five years of share price growth, Algonquin Power & Utilities actually saw its EPS drop 6.2% per year. This means it’s unlikely the market is judging the company based on earnings growth. Because earnings per share don’t seem to match up with the share price, we’ll take a look at other metrics instead.
In fact, the dividend has increased over time, which is a positive. Maybe dividend investors have helped support the share price. The revenue growth of about 20% per year might also encourage buyers.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Algonquin Power & Utilities stock, you should check out this free report showing analyst 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Algonquin Power & Utilities the TSR over the last 5 years was 142%, 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
It’s good to see that Algonquin Power & Utilities has rewarded shareholders with a total shareholder return of 23% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 19%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Algonquin Power & Utilities by clicking this link.
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 CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
