Most people feel a little frustrated if a stock they own goes down in price. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. Over the year the Altice USA, Inc. (NYSE:ATUS) share price fell 11%. However, that’s better than the market’s overall return of -17%. Altice USA hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. The last month has also been disappointing, with the stock slipping a further 34%. We do note, however, that the broader market is down 32% in that period, and this may have weighed on the share price.
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.
The last year saw Altice USA’s EPS really take off. We don’t think the growth guide to the sustainable growth rate in this case, but we do think this sort of increase is impressive. As a result, we’re surprised to see the weak share price. Some different data might shed some more light on the situation.
Revenue was pretty flat on last year, which isn’t too bad. But the share price might be lower because the market expected a meaningful improvement, and got none.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Altice USA is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
Given that the broader market dropped 17% over the year, the fact that Altice USA shareholders were down 11% isn’t so bad. However, the problem arose in the last three months, which saw the share price drop 30%. The recent drop implies that investors are increasingly averse to the stock — quite possibly due to a deterioration of the business. In times of uncertainty we usually try to focus on the long term fundamental business metrics. 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. Even so, be aware that Altice USA is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning…
But note: Altice USA 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.
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