American Tower Corporation (NYSE:AMT) shareholders might be concerned after seeing the share price drop 25% in the last quarter. But the silver lining is the stock is up over five years. Unfortunately its return of 34% is below the market return of 48%.
Although American Tower has shed US$4.1b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
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.
Over half a decade, American Tower managed to grow its earnings per share at 19% a year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that American Tower has improved its bottom line lately, but is it going to grow revenue? Check if analysts think American Tower will grow revenue in the future.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for American Tower the TSR over the last 5 years was 48%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 25% in the twelve months, American Tower shareholders did even worse, losing 29% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand American Tower better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for American Tower (of which 1 can't be ignored!) you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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. 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.
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