Yahoo Finance Earnings grew faster than the 25% return delivered to American Electric Power Company (NASDAQ:AEP) shareholders over the last year
It's always best to build a diverse portfolio of shares, since any stock business could lag the broader market. Of course, in an ideal world, all your stocks would beat the market. American Electric Power Company, Inc. (NASDAQ:AEP) has done well over the last year, with the stock price up 20% beating the market return of 17% (not including dividends). Having said that, the longer term returns aren't so impressive, with stock gaining just 8.7% in three years.
Since the long term performance has been good but there's been a recent pullback of 4.2%, let's check if the fundamentals match the share price.
Check out our latest analysis for American Electric Power Company
There is no denying that markets are sometimes efficient, but prices do not always reflect 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 the last year American Electric Power Company grew its earnings per share (EPS) by 30%. This EPS growth is significantly higher than the 20% increase in the share price. So it seems like the market has cooled on American Electric Power Company, despite the growth. Interesting.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that American Electric Power Company 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?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for American Electric Power Company the TSR over the last 1 year was 25%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that American Electric Power Company shareholders have received a total shareholder return of 25% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand American Electric Power Company better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with American Electric Power Company (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.
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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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.
