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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. For example, the Antero Midstream Corporation (NYSE:AM) share price has soared 114% in the last half decade. Most would be very happy with that.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Antero Midstream
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. 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.
During the five years of share price growth, Antero Midstream moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Antero Midstream share price has gained 45% in three years. Meanwhile, EPS is up 5.5% per year. This EPS growth is lower than the 13% average annual increase in the share price over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Antero Midstream's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Antero Midstream the TSR over the last 5 years was 277%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Antero Midstream shareholders have received a total shareholder return of 35% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 30%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 2 warning signs for Antero Midstream that you should be aware of.