Those who invested in Altria Group (NYSE:MO) a year ago are up 35%

On average, over time, stock markets tend to rise higher. This makes investing attractive. But not every stock you buy will perform as well as the overall market. For example, the Altria Group, Inc. (NYSE:MO), share price is up over the last year, but its gain of 24% trails the market return. Having said that, the longer term returns aren't so impressive, with stock gaining just 13% in three years.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Altria Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Altria Group was able to grow EPS by 52% in the last twelve months. This EPS growth is significantly higher than the 24% increase in the share price. So it seems like the market has cooled on Altria Group, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 8.37.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Altria Group 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Altria Group the TSR over the last 1 year was 35%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Altria Group shareholders gained a total return of 35% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 10% per year over five year. It is possible that returns will improve along with the business fundamentals. 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. Case in point: We've spotted 2 warning signs for Altria Group you should be aware of, and 1 of them is a bit unpleasant.

But note: Altria Group 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 American 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.