Stock Analysis

    Some Aggreko (LON:AGK) Shareholders Are Down 42%

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    The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Aggreko Plc (LON:AGK) shareholders for doubting their decision to hold, with the stock down 42% over a half decade.

    Check out our latest analysis for Aggreko

    There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

    Looking back five years, both Aggreko's share price and EPS declined; the latter at a rate of 12% per year. The share price decline of 10% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.

    The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

    LSE:AGK Past and Future Earnings, December 31st 2019
    LSE:AGK Past and Future Earnings, December 31st 2019

    While the share price will often move with EPS, other factors can also play a role. For example, we've discovered 1 warning sign for Aggreko which any shareholder or potential investor should be aware of.

    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 Aggreko the TSR over the last 5 years was -33%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

    A Different Perspective

    Aggreko's TSR for the year was broadly in line with the market average, at 20%. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 7.6%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for Aggreko. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

    But note: Aggreko 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 GB exchanges.

    If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

    We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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

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