Stock Analysis

Altarea (EPA:ALTA) stock falls 7.5% in past week as five-year earnings and shareholder returns continue downward trend

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ENXTPA:ALTA
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The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Altarea SCA (EPA:ALTA), since the last five years saw the share price fall 38%. We also note that the stock has performed poorly over the last year, with the share price down 35%.

Since Altarea has shed €198m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Altarea

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...' 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.

Altarea became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
ENXTPA:ALTA Earnings and Revenue Growth September 28th 2022

We know that Altarea has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Altarea

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Altarea's TSR for the last 5 years was -13%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 10% in the twelve months, Altarea shareholders did even worse, losing 29% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. 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. 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. For instance, we've identified 4 warning signs for Altarea (1 is potentially serious) that you should be aware of.

But note: Altarea 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 FR exchanges.

Valuation is complex, but we're helping make it simple.

Find out whether Altarea is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About ENXTPA:ALTA

Altarea

Altarea is the leading real estate developer from France.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation3
Future Growth1
Past Performance1
Financial Health4
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Adequate balance sheet average dividend payer.