United States Cellular (NYSE:USM) delivers shareholders strong 215% return over 1 year, surging 7.3% in the last week alone

When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the United States Cellular Corporation (NYSE:USM) share price has soared 215% return in just a single year. On top of that, the share price is up 53% in about a quarter. It is also impressive that the stock is up 54% over three years, adding to the sense that it is a real winner.

The past week has proven to be lucrative for United States Cellular investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for United States Cellular

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.

United States Cellular went from making a loss to reporting a profit, in the last year.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

United States Cellular's revenue actually dropped 6.6% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that United States Cellular has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for United States Cellular in this interactive graph of future profit estimates.

A Different Perspective

It's nice to see that United States Cellular shareholders have received a total shareholder return of 215% over the last year. That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with United States Cellular (at least 1 which is significant) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com