Strong week for Transat A.T (TSE:TRZ) shareholders doesn't alleviate pain of five-year loss
Transat A.T. Inc. (TSE:TRZ) shareholders should be happy to see the share price up 13% in the last month. But if you look at the last five years the returns have not been good. In fact, the share price is down 47%, which falls well short of the return you could get by buying an index fund.
On a more encouraging note the company has added CA$12m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
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.
During five years of share price growth, Transat A.T moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
Revenue is actually up 38% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Transat A.T has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Transat A.T stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that Transat A.T has rewarded shareholders with a total shareholder return of 46% in the last twelve months. Notably the five-year annualised TSR loss of 8% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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 5 warning signs with Transat A.T (at least 3 which shouldn't be ignored) , and understanding them should be part of your investment process.
But note: Transat A.T may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian 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.