Earnings grew faster than the 25% return that American Electric Power Company (NASDAQ:AEP) shareholders received over the past year

It is always best to build a diversified portfolio of stocks, as any given stock can lag behind the broader market. Of course, in an ideal world, all of your stocks would beat the market. American Electric Power Company, Inc. (NASDAQ:AEP) has done well over the past year, with the stock up 20%, beating the market return of 17% (excluding dividends). However, the long-term returns haven’t been impressive, with the stock up just 8.7% over three years.

Since the long-term results are strong but the stock is down 4.2% recently, let’s see if the fundamentals align with the stock price.

Check out our latest analysis for American Electric Power Company

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Over the past year, American Electric Power Company has grown its earnings per share (EPS) by 30%. This EPS growth is significantly higher than the 20% increase in the share price. So it looks like the market has cooled off on American Electric Power Company, despite the growth. Interesting.

The image below shows how EPS has changed over time (you can see more detail by clicking on the image).

We know that American Electric Power Company has recently improved its net income, but will it increase revenue? free A report showing analyst revenue forecasts should help you assess whether earnings per share growth is sustainable.

What about dividends?

It’s important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR includes the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It could be argued that the TSR gives a more comprehensive picture of the returns a stock is generating. We note that for American Electric Power Company the TSR over the last year was 25%, 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!

Another perspective

It’s great to see that American Electric Power Company shareholders have received a total shareholder return of 25% over the last year. And that includes the dividend. Given that the one-year TSR is better than the five-year TSR (the latter of which is 5% per year), it seems that the stock’s performance has improved recently. At best, this could suggest some real business momentum, meaning that now could be a great time to dive in. It’s always interesting to track share price performance over the long term. But to better understand American Electric Power Company, we need to consider a number of other factors. For example, consider the ever-present specter of investment risk. We have identified 3 warning signs from American Electric Power Company (at least one that shouldn’t be ignored), and understanding them should be part of your investing process.

The story continues

For those who like to find winning investments This free a list of undervalued companies whose recent purchases were made by insiders may be just what you’re looking for.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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This Simply Wall St article is for general information purposes only. Our commentary is based solely on historical data and analyst forecasts, and is based on an objective methodology. Our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.