Investors who have held Algonquin Power & Utilities (TSE:AQN) over the last three years have watched its earnings decline along with their investment

For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Algonquin Power & Utilities Corp. (TSE:AQN) shareholders have had that experience, with the share price dropping 57% in three years, versus a market return of about 22%. And the ride hasn't got any smoother in recent times over the last year, with the price 26% lower in that time.

While the stock has risen 4.6% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Algonquin Power & Utilities

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

During five years of share price growth, Algonquin Power & Utilities moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

We note that the dividend has declined - a likely contributor to the share price drop. In contrast it does not seem particularly likely that the revenue levels are a concern for investors.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Algonquin Power & Utilities will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Algonquin Power & Utilities the TSR over the last 3 years was -49%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 8.7% in the last year, Algonquin Power & Utilities shareholders lost 21% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Algonquin Power & Utilities better, we need to consider many other factors. For instance, we've identified 3 warning signs for Algonquin Power & Utilities (2 make us uncomfortable) that you should be aware of.

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 Canadian 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.