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The Equitrans Midstream (NYSE:ETRN) Share Price Is Down 35% So Some Shareholders Are Getting Worried

Simply Wall St

Over the last month the Equitrans Midstream Corporation (NYSE:ETRN) has been much stronger than before, rebounding by 31%. But in truth the last year hasn't been good for the share price. After all, the share price is down 35% in the last year, significantly under-performing the market.

View our latest analysis for Equitrans Midstream

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Unfortunately Equitrans Midstream reported an EPS drop of 88% for the last year. This fall in the EPS is significantly worse than the 35% the share price fall. It may have been that the weak EPS was not as bad as some had feared. Indeed, with a P/E ratio of 197.92 there is obviously some real optimism that earnings will bounce back.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NYSE:ETRN Past and Future Earnings, December 31st 2019

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Equitrans Midstream the TSR over the last year was -27%, 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

While Equitrans Midstream shareholders are down 27% for the year (even including dividends) , the market itself is up 31%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 6.7% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

There are plenty of other companies that have insiders buying up shares. You probably do 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.

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.