In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Atlantica Sustainable Infrastructure plc (NASDAQ:AY) shareholders have had that experience, with the share price dropping 39% in three years, versus a market return of about 21%. And more recent buyers are having a tough time too, with a drop of 28% in the last year. Furthermore, it's down 23% in about a quarter. That's not much fun for holders.

While the last three years has been tough for Atlantica Sustainable Infrastructure shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for Atlantica Sustainable Infrastructure

We don't think that Atlantica Sustainable Infrastructure's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last three years, Atlantica Sustainable Infrastructure saw its revenue grow by 3.5% per year, compound. That's not a very high growth rate considering it doesn't make profits. Indeed, the stock dropped 11% over the last three years. Shareholders will probably be hoping growth picks up soon. But the real upside for shareholders will be if the company can start generating profits.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Atlantica Sustainable Infrastructure is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Atlantica Sustainable Infrastructure stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Atlantica Sustainable Infrastructure the TSR over the last 3 years was -27%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 18% in the last year, Atlantica Sustainable Infrastructure shareholders lost 23% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Even so, be aware that Atlantica Sustainable Infrastructure is showing 3 warning signs in our investment analysis , and 1 of those is significant...

We will like Atlantica Sustainable Infrastructure better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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.