Is American Axle & Manufacturing Holdings' (NYSE:AXL) 284% Share Price Increase Well Justified?

By
Simply Wall St
Published
March 19, 2021
NYSE:AXL
Source: Shutterstock

It's been a soft week for American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) shares, which are down 11%. But that doesn't change the fact that the returns over the last year have been very strong. We're very pleased to report the share price shot up 284% in that time. So some might not be surprised to see the price retrace some. The real question is whether the business is trending in the right direction.

Check out our latest analysis for American Axle & Manufacturing Holdings

Given that American Axle & Manufacturing Holdings didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last year American Axle & Manufacturing Holdings saw its revenue shrink by 28%. So we would not have expected the share price to rise 284%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.

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
NYSE:AXL Earnings and Revenue Growth March 20th 2021

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We're pleased to report that American Axle & Manufacturing Holdings shareholders have received a total shareholder return of 284% over one year. Notably the five-year annualised TSR loss of 4% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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. Even so, be aware that American Axle & Manufacturing Holdings is showing 2 warning signs in our investment analysis , you should know about...

For those who like to find winning investments 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 US exchanges.

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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. 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.
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