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If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Genie Energy Ltd. (NYSE:GNE) share price is 63% higher than it was a year ago, much better than the market return of around -2.4% (not including dividends) in the same period. That’s a solid performance by our standards! However, the stock hasn’t done so well in the longer term, with the stock only up 4.6% in three years.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Genie Energy went from making a loss to reporting a profit, in the last year. When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
However the year on year revenue growth of 6.1% would help. We do see some companies suppress earnings in order to accelerate revenue growth.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Genie Energy the TSR over the last year was 73%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It’s good to see that Genie Energy has rewarded shareholders with a total shareholder return of 73% in the last twelve months. And that does include the dividend. Notably the five-year annualised TSR loss of 2.6% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Importantly, we haven’t analysed Genie Energy’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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 email@example.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.