Yahoo Finance Shareholders in Alaska Air Group (NYSE:ALK) are in the red if they invested five years ago
For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Alaska Air Group, Inc. (NYSE:ALK), since the last five years saw the share price fall 26%. More recently, the share price has dropped a further 15% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Alaska Air Group
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 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.
Looking back five years, both Alaska Air Group's share price and EPS declined; the latter at a rate of 27% per year. This fall in the EPS is worse than the 6% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Alaska Air Group has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Alaska Air Group's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Alaska Air Group's TSR, which was a 23% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
Alaska Air Group provided a TSR of 1.3% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 4% endured over half a decade. It could well be that the business is stabilizing. 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. For example, we've discovered 2 warning signs for Alaska Air Group (1 is significant!) that you should be aware of before investing here.
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 American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
