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PG&E (NYSE:PCG) shareholders have earned a 18% CAGR over the last three years

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, PG&E Corporation (NYSE:PCG) shareholders have seen the share price rise 64% over three years, well in excess of the market return (40%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 45% in the last year.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for PG&E

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

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During three years of share price growth, PG&E moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

It is of course excellent to see how PG&E has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

It's nice to see that PG&E shareholders have received a total shareholder return of 45% over the last year. There's no doubt those recent returns are much better than the TSR loss of 10% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand PG&E better, we need to consider many other factors. Even so, be aware that PG&E is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

We will like PG&E better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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