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One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Air Transport Services Group, Inc. (NASDAQ:ATSG), which is up 37%, over three years, soundly beating the market return of 21% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 9.5%. 

finviz dynamic chart for ATSG

Since the stock has added US$211m to its market cap in the past week alone, let’s see if underlying performance has been driving long-term returns. 

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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). 

Air Transport Services Group was able to grow its EPS at 92% per year over three years, sending the share price higher. This EPS growth is higher than the 11% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.45. 

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image). 

NasdaqGS:ATSG Earnings Per Share Growth October 8th 2022

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Air Transport Services Group’s earnings, revenue and cash flow

A Different Perspective

It’s good to see that Air Transport Services Group has rewarded shareholders with a total shareholder return of 9.5% in the last twelve months. That’s better than the annualised return of 2% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 1 warning sign for Air Transport Services Group that you should be aware of.

Photo by Patrick Campanale on Unsplash

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