Does Alico's (NASDAQ:ALCO) Share Price Gain of 17% Match Its Business Performance?

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Alico, Inc. (NASDAQ:ALCO) share price is up 17% in the last five years, that's less than the market return. Zooming in, the stock is actually down 8.5% in the last year.

See our latest analysis for Alico

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Alico achieved compound earnings per share (EPS) growth of 43% per year. The EPS growth is more impressive than the yearly share price gain of 3% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 8.39 also suggests market apprehension.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how Alico has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Alico the TSR over the last 5 years was 23%, 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

Alico shareholders are down 7.1% for the year (even including dividends), but the market itself is up 40%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Alico better, we need to consider many other factors. Even so, be aware that Alico is showing 5 warning signs in our investment analysis , and 2 of those are potentially serious...

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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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