Yahoo Finance If You Had Bought AltaGas (TSE:ALA) Stock Five Years Ago, You'd Be Sitting On A 67% Loss, Today
We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. Zooming in on an example, the AltaGas Ltd. (TSE:ALA) share price dropped 67% in the last half decade. That is extremely sub-optimal, to say the least. Unfortunately the share price momentum is still quite negative, with prices down 38% in thirty days. However, we note the price may have been impacted by the broader market, which is down 23% in the same time period.
Check out our latest analysis for AltaGas
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
AltaGas became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling AltaGas 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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, AltaGas's TSR for the last 5 years was -55%, 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
AltaGas shareholders are down 18% over twelve months (even including dividends) , which isn't far from the market return of -18%. So last year was actually even worse than the last five years, which cost shareholders 15% per year. It will probably take a substantial improvement in the fundamental performance for the company to reverse this 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. Case in point: We've spotted 6 warning signs for AltaGas you should be aware of, and 2 of them are significant.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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.
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. Thank you for reading.
