Yahoo Finance Did You Participate In Any Of Contact Energy's (NZSE:CEN) Respectable 96% Return?
While Contact Energy Limited (NZSE:CEN) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 29% in the last quarter. On the bright side the share price is up over the last half decade. In that time, it is up 44%, which isn't bad, but is below the market return of 82%.
Check out our latest analysis for Contact Energy
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last half decade, Contact Energy became profitable. That's generally thought to be a genuine positive, so we would expect to see an increasing share price. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Contact Energy share price has gained 36% in three years. In the same period, EPS is up 21% per year. This EPS growth is higher than the 11% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.
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. On the other hand, we think the revenue and earnings trends are much more meaningful measures of 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Contact Energy the TSR over the last 5 years was 96%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Contact Energy shareholders have received returns of 29% over twelve months (even including dividends), which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 14% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand Contact Energy better, we need to consider many other factors. Even so, be aware that Contact Energy is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
Contact 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 NZ exchanges.
This article by Simply Wall St is general in nature. 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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