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It's easy to feel disappointed if you buy a stock that goes down. But in the short term the market is a voting machine, and the share price movements may not reflect the underlying business performance. The Acuity Brands, Inc. (NYSE:AYI) is down 22% over a year, but the total shareholder return is -22% once you include the dividend. And that total return actually beats the market decline of 22%. On the bright side, the stock is actually up 19% in the last three years. More recently, the share price has dropped a further 12% in a month. However, we note the price may have been impacted by the broader market, which is down 6.0% in the same time period.
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.
View our latest analysis for Acuity Brands
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Even though the Acuity Brands share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.
It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.
Given the yield is quite low, at 0.3%, we doubt the dividend can shed much light on the share price. Acuity Brands' revenue is actually up 16% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Acuity Brands will earn in the future (free profit forecasts).
A Different Perspective
Acuity Brands shareholders are down 22% over twelve months (even including dividends), which isn't far from the market return of -22%. So last year was actually even worse than the last five years, which cost shareholders 1.7% per year. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.