The three-year shareholder returns and company earnings persist lower as Algonquin Power & Utilities (TSE:AQN) stock falls a further 7.1% in past week

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Algonquin Power & Utilities Corp. (TSE:AQN) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 65% decline in the share price in that time. And the share price decline continued over the last week, dropping some 7.1%. However, this move may have been influenced by the broader market, which fell 5.7% in that time.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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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 three years that the share price fell, Algonquin Power & Utilities' earnings per share (EPS) dropped by 29% each year. The 30% average annual share price decline is remarkably close to the EPS decline. So it seems like sentiment towards the stock hasn't changed all that much over time. It seems like the share price is reflecting the declining earnings per share.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Algonquin Power & Utilities' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Algonquin Power & Utilities' TSR for the last 3 years was -58%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Algonquin Power & Utilities shareholders are down 13% for the year (even including dividends), but the market itself is up 5.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 9% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. For example, we've discovered 3 warning signs for Algonquin Power & Utilities (2 can't be ignored!) that you should be aware of before investing here.

Algonquin Power & Utilities is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing 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 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.