The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the United States Cellular Corporation (NYSE:USM) share price is 98% higher than it was a year ago, much better than the market return of around 18% (not including dividends) in the same period. So that should have shareholders smiling. However, the longer term returns haven't been so impressive, with the stock up just 29% in the last three years.
While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
United States Cellular went from making a loss to reporting a profit, in the last year.
When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).
Unfortunately United States Cellular's fell 5.6% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on United States Cellular's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that United States Cellular shareholders have received a total shareholder return of 98% over the last year. That certainly beats the loss of about 4% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for United States Cellular (of which 1 is a bit concerning!) you should know about.
But note: United States Cellular may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
