EnLink Midstream (NYSE:ENLC) delivers shareholders incredible 73% CAGR over 3 years, surging 6.6% in the last week alone
While EnLink Midstream, LLC (NYSE:ENLC) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. But over three years the performance has been really wonderful. In fact, the share price has taken off in that time, up 321%. Arguably, the recent fall is to be expected after such a strong rise. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.
Since the stock has added US$283m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Check out our latest analysis for EnLink Midstream
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 three years of share price growth, EnLink Midstream moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how EnLink Midstream has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, EnLink Midstream's TSR for the last 3 years was 420%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 5.6% in the last year, EnLink Midstream shareholders lost 1.2% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.1% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand EnLink Midstream better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with EnLink Midstream (including 1 which doesn't sit too well with us) .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
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