It hasn’t been the best quarter for Allied Motion Technologies Inc. (NASDAQ:AMOT) shareholders, since the share price has fallen 12% in that time. But that doesn’t change the fact that the returns over the last five years have been very strong. It’s fair to say most would be happy with 219% the gain in that time. We think it’s more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
During five years of share price growth, Allied Motion Technologies achieved compound earnings per share (EPS) growth of 31% per year. So the EPS growth rate is rather close to the annualized share price gain of 26% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Allied Motion Technologies has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Allied Motion Technologies will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Allied Motion Technologies the TSR over the last 5 years was 225%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It’s good to see that Allied Motion Technologies has rewarded shareholders with a total shareholder return of 4.3% in the last twelve months. That’s including the dividend. However, the TSR over five years, coming in at 27% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before forming an opinion on Allied Motion Technologies you might want to consider these 3 valuation metrics.
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.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.