American Tower's (NYSE:AMT) earnings growth rate lags the 23% CAGR delivered to shareholders

By
Simply Wall St
Published
January 10, 2022
NYSE:AMT
Source: Shutterstock

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of American Tower Corporation (NYSE:AMT) stock is up an impressive 158% over the last five years. Unfortunately, though, the stock has dropped 8.9% over a week. But this could be related to the soft market, with stocks selling off around 2.5% in the last week.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for American Tower

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, American Tower achieved compound earnings per share (EPS) growth of 22% per year. So the EPS growth rate is rather close to the annualized share price gain of 21% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
NYSE:AMT Earnings Per Share Growth January 10th 2022

We know that American Tower has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 American Tower the TSR over the last 5 years was 184%, 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

It's nice to see that American Tower shareholders have received a total shareholder return of 22% over the last year. Of course, that includes the dividend. However, that falls short of the 23% TSR per annum it has made for shareholders, each year, over five years. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for American Tower (1 shouldn't be ignored) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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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