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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Ames National Corporation (NASDAQ:ATLO) shareholders for doubting their decision to hold, with the stock down 31% over a half decade. Furthermore, it's down 11% in about a quarter. That's not much fun for holders.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Ames National
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Looking back five years, both Ames National's share price and EPS declined; the latter at a rate of 11% per year. The share price decline of 7% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Ames National the TSR over the last 5 years was -13%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Ames National shareholders are up 25% for the year (even including dividends). Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 2% per year, over five years. It could well be that the business is stabilizing. 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. Even so, be aware that Ames National is showing 3 warning signs in our investment analysis , and 1 of those is significant...