Buying a low-cost index fund will get you the average market return. But if you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, while the Altice USA, Inc. (NYSE:ATUS) share price is up 19% in the last three years, that falls short of the market return. Disappointingly, the share price is down 14% in the last year.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years of share price growth, Altice USA moved from a loss to profitability. So we would expect a higher share price over the period.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Altice USA's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We've already covered Altice USA's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that Altice USA's TSR, at 33% is higher than its share price return of 19%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
Altice USA shareholders are down 14% for the year, but the broader market is up 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Investors are up over three years, booking 10% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. It's always interesting to track share price performance over the longer term. But to understand Altice USA better, we need to consider many other factors. For instance, we've identified 4 warning signs for Altice USA (1 is a bit unpleasant) that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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