Investing in CenterPoint Energy (NYSE:CNP) three years ago would have delivered you a 23% gain
Low-cost index funds make it easy to achieve average market returns. But if you invest in individual stocks, some are likely to underperform. For example, the CenterPoint Energy, Inc. (NYSE:CNP) share price return of 13% over three years lags the market return in the same period. Looking at more recent returns, the stock is up 8.7% in a year.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
View our latest analysis for CenterPoint Energy
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
During three years of share price growth, CenterPoint Energy achieved compound earnings per share growth of 9.9% per year. This EPS growth is higher than the 4% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.
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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. We note that for CenterPoint Energy the TSR over the last 3 years was 23%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that CenterPoint Energy has rewarded shareholders with a total shareholder return of 11% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for CenterPoint Energy (of which 1 is a bit unpleasant!) you should know about.
CenterPoint Energy is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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