Investors in Innergex Renewable Energy (TSE:INE) have unfortunately lost 18% over the last three years
For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Innergex Renewable Energy Inc. (TSE:INE) shareholders, since the share price is down 27% in the last three years, falling well short of the market return of around 61%. The falls have accelerated recently, with the share price down 15% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Innergex Renewable Energy
Given that Innergex Renewable Energy didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years, Innergex Renewable Energy saw its revenue grow by 16% per year, compound. That's a pretty good rate of top-line growth. Shareholders have endured a share price decline of 8% per year. So the market has definitely lost some love for the stock. However, that's in the past now, and it's the future is more important - and the future looks brighter (based on revenue, anyway).
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling Innergex Renewable Energy stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Innergex Renewable Energy, it has a TSR of -18% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Innergex Renewable Energy shareholders are down 19% for the year (even including dividends), but the market itself is up 2.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Innergex Renewable Energy , and understanding them should be part of your investment process.
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 Canadian 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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