Yahoo Finance Atmos Energy (NYSE:ATO) shareholders have earned a 9.3% CAGR over the last three years
One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Atmos Energy Corporation (NYSE:ATO) share price is up 21% in the last three years, clearly besting the market return of around 13% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 2.2%, including dividends.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
View our latest analysis for Atmos Energy
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Atmos Energy achieved compound earnings per share growth of 6.1% per year. We note that the 7% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. That suggests that the market sentiment around the company hasn't changed much over that time. Quite to the contrary, the share price has arguably reflected the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Atmos Energy has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Atmos Energy 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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Atmos Energy, it has a TSR of 31% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Atmos Energy shareholders gained a total return of 2.2% during the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 4% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Even so, be aware that Atmos Energy is showing 3 warning signs in our investment analysis , you should know about...
Of course Atmos Energy may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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
