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Did Eversource Energy's (NYSE:ES) Share Price Deserve to Gain 36%?

Simply Wall St

It might be of some concern to shareholders to see the Eversource Energy (NYSE:ES) share price down 29% in the last month. Looking further back, the stock has generated good profits over five years. Its return of 36% has certainly bested the market return!

View our latest analysis for Eversource Energy

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Eversource Energy achieved compound earnings per share (EPS) growth of 1.8% per year. This EPS growth is slower than the share price growth of 6.4% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

NYSE:ES Past and Future Earnings, March 21st 2020

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Eversource Energy's TSR for the last 5 years was 59%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that Eversource Energy shares lost 2.1% throughout the year, that wasn't as bad as the market loss of 17%. Longer term investors wouldn't be so upset, since they would have made 9.8%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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 example, we've discovered 3 warning signs for Eversource Energy (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Eversource Energy is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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.

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. Thank you for reading.