Those who invested in Aroundtown (ETR:AT1) a year ago are up 51%

By
Simply Wall St
Published
September 27, 2021
XTRA:AT1
Source: Shutterstock

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. To wit, the Aroundtown SA (ETR:AT1) share price is 42% higher than it was a year ago, much better than the market return of around 24% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 20% in three years.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Aroundtown

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the last twelve months, Aroundtown actually shrank its EPS by 53%.

Given the share price gain, we doubt the market is measuring progress with EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

For starters, we suspect the share price has been buoyed by the dividend, which was increased during the year. Income-seeking investors probably helped bid up the stock price. Though we must add that the revenue growth of 3.2% year on year would have helped paint a pretty picture.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
XTRA:AT1 Earnings and Revenue Growth September 28th 2021

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So we recommend checking out this free report showing consensus forecasts

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. As it happens, Aroundtown's TSR for the last 1 year was 51%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Aroundtown shareholders have gained 51% (in total) over the last year. That includes the value of the dividend. What is absolutely clear is that is far preferable to the dismal 4% average annual loss suffered over the last three years. It could well be that the business has turned around -- or else regained the confidence of investors. It's always interesting to track share price performance over the longer term. But to understand Aroundtown better, we need to consider many other factors. Even so, be aware that Aroundtown is showing 3 warning signs in our investment analysis , and 1 of those is concerning...

If you are like me, then you will 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 DE exchanges.

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