nVent Electric (NYSE:NVT) jumps 5.4% this week, though earnings growth is still tracking behind three-year shareholder returns
Vanguard founder Jack Bogle helped spearhead the low-cost index fund, putting average returns within reach of every investor. But you can make better returns by buying undervalued shares. Notably, the nVent Electric plc (NYSE:NVT) share price has gained 44% in three years, which is better than the average market return. Zooming in, the stock is up a respectable 12% in the last year.
Since the stock has added US$303m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
View our latest analysis for nVent Electric
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.
nVent Electric became profitable within the last three years. So we would expect a higher share price over the period.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. 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). 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. We note that for nVent Electric the TSR over the last 3 years was 57%, 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
We're pleased to report that nVent Electric rewarded shareholders with a total shareholder return of 14% over the last year. That's including the dividend. The TSR has been even better over three years, coming in at 16% per year. It's always interesting to track share price performance over the longer term. But to understand nVent Electric better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with nVent Electric .
nVent Electric 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.
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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.
