Despite shrinking by US$11m in the past week, Atlantic American (NASDAQ:AAME) shareholders are still up 50% over 1 year

Atlantic American Corporation (NASDAQ:AAME) shareholders might understandably be very concerned that the share price has dropped 32% in the last quarter. But looking back over the last year, the returns have actually been rather pleasing! In that time we've seen the stock easily surpass the market return, with a gain of 48%.

In light of the stock dropping 19% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

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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 the last year Atlantic American grew its earnings per share, moving from a loss to a profit.

The result looks like a strong improvement to us, so we're not surprised the market likes the growth. Inflection points like this can be a great time to take a closer look at a company.

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

This free interactive report on Atlantic American's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Atlantic American, it has a TSR of 50% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Atlantic American shareholders have received a total shareholder return of 50% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Atlantic American better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Atlantic American you should be aware of, and 1 of them is a bit concerning.

We will like Atlantic American better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.