The AES (NYSE:AES) Share Price Is Up 50% And Shareholders Are Holding On
You can receive the average market return by buying a low-cost index fund. But you can make superior returns by picking better-than average stocks. To wit, The AES Corporation (NYSE:AES) shares are up 50% in three years, besting the market return. More recently the stock has gained 18% in a year, which isn't too bad.
See our latest analysis for AES
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).
AES was able to grow its EPS at 41% per year over three years, sending the share price higher. The average annual share price increase of 15% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that AES has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at AES's financial health with this free report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for AES the TSR over the last 3 years was 69%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that AES shareholders have received a total shareholder return of 22% over the last year. And that does include the dividend. That's better than the annualised return of 8.3% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on AES it might be wise to click here to see if insiders have been buying or selling shares.
Of course AES may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
