Does Jersey Electricity's (LON:JEL) Share Price Gain of 15% Match Its Business Performance?
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. To wit, the Jersey Electricity plc (LON:JEL) share price is 15% higher than it was a year ago, much better than the market decline of around 11% (not including dividends) in the same period. That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 7.0% higher than it was three years ago.
See our latest analysis for Jersey Electricity
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During the last year, Jersey Electricity actually saw its earnings per share drop 1.3%.
Sometimes companies will sacrifice EPS in the short term for longer term gains; and in that case we may be able to find other positives. It makes sense to check some of the other fundamental data for an explanation of the share price rise.
Revenue was pretty flat year on year, but maybe a closer look at the data can explain the market optimism.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. 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). 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. In the case of Jersey Electricity, it has a TSR of 19% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Jersey Electricity shareholders have received a total shareholder return of 19% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Jersey Electricity you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
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 GB exchanges.
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. 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.
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