When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Public Service Enterprise Group Incorporated (NYSE:PEG) has fallen short of that second goal, with a share price rise of 17% over five years, which is below the market return. The last year hasn’t been great either, with the stock up just 3.9%.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Public Service Enterprise Group
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, Public Service Enterprise Group managed to grow its earnings per share at 5.3% a year. The EPS growth is more impressive than the yearly share price gain of 3% over the same period. So it seems the market isn’t so enthusiastic about the stock these days. The reasonably low P/E ratio of 10.93 also suggests market apprehension.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Public Service Enterprise Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Public Service Enterprise Group, it has a TSR of 39% for the last 5 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Public Service Enterprise Group shareholders gained a total return of 7.9% during the year. But that was short of the market average. On the bright side, that’s still a gain, and it’s actually better than the average return of 7% over half a decade This suggests the company might be improving over time. It’s always interesting to track share price performance over the longer term. But to understand Public Service Enterprise Group better, we need to consider many other factors. For instance, we’ve identified 3 warning signs for Public Service Enterprise Group (2 can’t be ignored) that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
