ATM Grupa (WSE:ATG) investors are up 12% in the past week, but earnings have declined over the last year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the ATM Grupa S.A. (WSE:ATG) share price is up 38% in the last 1 year, clearly besting the market return of around 21% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! The longer term returns have not been as good, with the stock price only 18% higher than it was three years ago.

Since it's been a strong week for ATM Grupa shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for ATM Grupa

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.

During the last year, ATM Grupa actually saw its earnings per share drop 37%.

So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

For starters, we suspect the share price has been buoyed by the dividend, which was increased during the year. It could be that the company is reaching maturity and dividend investors are buying for the yield, pushing the price up in the process.

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

This free interactive report on ATM Grupa's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, ATM Grupa's TSR for the last 1 year was 48%, 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 ATM Grupa shareholders have received a total shareholder return of 48% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand ATM Grupa better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for ATM Grupa you should know about.

For those who like to find winning investments this free list of undervalued 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 Polish 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com