AMP's (ASX:AMP) earnings trajectory could turn positive as the stock advances 3.9% this past week

While it may not be enough for some shareholders, we think it is good to see the AMP Limited (ASX:AMP) share price up 10% in a single quarter. But over the last half decade, the stock has not performed well. In fact, the share price is down 32%, which falls well short of the return you could get by buying an index fund.

While the stock has risen 3.9% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for AMP

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.

During the five years over which the share price declined, AMP's earnings per share (EPS) dropped by 5.4% each year. This reduction in EPS is less than the 7% annual reduction in the share price. This implies that the market is more cautious about the business these days. Having said that, the market is still optimistic, given the P/E ratio of 161.89.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that AMP 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of AMP, it has a TSR of -22% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

AMP's TSR for the year was broadly in line with the market average, at 9.9%. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 4% over the last five years. While 'turnarounds seldom turn' there are green shoots for AMP. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - AMP has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com