The 37% return offered to Air Transport Services Group (NASDAQ:ATSG) shareholders actually lagged year-on-year earnings growth

A simple way to profit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns and build a portfolio ourselves. Just take a look at Airline Services Group, Inc. (NASDAQ:ATSG), which is up 37% over three years, significantly beating the market return of 21% (excluding dividends). On the other hand, returns haven’t been as good recently, with shareholders up just 9.5%.

Given that the stock has added $211 million to its market capitalization in the past week alone, let’s see if the underlying performance has generated long-term returns.

In his test The Graham-and-Doddsville super-investors Warren Buffett has described how stock prices don’t always rationally reflect a company’s value. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).

Air Transport Services Group was able to increase EPS by 92% annually over three years, driving the stock price higher. This EPS growth is greater than the average annual share price increase of 11%. We could therefore reasonably conclude that the market has cooled down on the stock. This cautious sentiment is reflected in its (rather low) P/E ratio of 9.45.

The graph below illustrates the evolution of EPS over time (reveal the exact values ​​by clicking on the image).

NasdaqGS: ATSG Earnings Per Share Growth October 8, 2022

We appreciate the fact that insiders have been buying stocks over the past twelve months. Even so, future earnings will be far more important to whether current shareholders are making money. It might be interesting to take a look at our free Air Transport Services Group earnings, revenue and cash flow report.

A different perspective

It is good to see that Air Transport Services Group has rewarded its shareholders with a total shareholder return of 9.5% over the past twelve months. That’s better than the 2% annualized return over half a decade, which implies the company has been doing better recently. Given that the stock price momentum remains strong, it might be worth taking a closer look at the stock lest you miss an opportunity. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. For example, we have identified 1 warning sign for Air Transport Services Group of which you should be aware.

There are many other companies whose insiders buy shares. You probably do not want to miss this free list of growing companies insiders are buying.

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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