When you buy shares in a company, it’s worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Ameriprise Financial, Inc. (NYSE:AMP) which saw its share price drive 221% higher over five years. Also pleasing for shareholders was the 14% gain in the last three months.
So let’s assess the underlying fundamentals over the last 5 years and see if they’ve moved in lock-step with shareholder returns.
View our latest analysis for Ameriprise Financial
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).
During five years of share price growth, Ameriprise Financial achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is lower than the 26% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that’s hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Ameriprise Financial’s key metrics by checking this interactive graph of Ameriprise Financial’s earnings, revenue and cash flow.
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Ameriprise Financial’s TSR for the last 5 years was 251%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
It’s nice to see that Ameriprise Financial shareholders have received a total shareholder return of 43% over the last year. That’s including the dividend. That gain is better than the annual TSR over five years, which is 29%. 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. 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. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Ameriprise Financial you should know about.
