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American Superconductor Corporation (NASDAQ:AMSC) shareholders might be concerned after seeing the share price drop 26% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. In fact, the share price is 212% higher today. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
Given that American Superconductor only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
For the last half decade, American Superconductor can boast revenue growth at a rate of 19% per year. That's well above most pre-profit companies. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 26% per year, in that time. This suggests the market has well and truly recognized the progress the business has made. American Superconductor seems like a high growth stock - so growth investors might want to add it to their watchlist.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It is of course excellent to see how American Superconductor has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It's nice to see that American Superconductor shareholders have received a total shareholder return of 34% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 26% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 American Superconductor is showing 2 warning signs in our investment analysis , you should know about...