Consolidated Edison, Inc. (NYSE:ED) shareholders might be concerned after seeing the share price drop 11% in the last quarter. But the silver lining is the stock is up over five years. In that time, it is up 33%, which isn't bad, but is below the market return of 36%.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Over half a decade, Consolidated Edison managed to grow its earnings per share at 1.9% a year. This EPS growth is lower than the 5.9% average annual increase in the share price. 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).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Consolidated Edison's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Consolidated Edison's TSR for the last 5 years was 60%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Although it hurts that Consolidated Edison returned a loss of 1.5% in the last twelve months, the broader market was actually worse, returning a loss of 8.5%. Longer term investors wouldn't be so upset, since they would have made 9.8%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Consolidated Edison has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
Consolidated Edison 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.
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