The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Public Service Enterprise Group Incorporated (NYSE:PEG) share price is up 65% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 11% 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.
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 five years of share price growth, Public Service Enterprise Group moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Public Service Enterprise Group 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.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Public Service Enterprise Group the TSR over the last 5 years was 95%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Public Service Enterprise Group has rewarded shareholders with a total shareholder return of 14% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 14% a year, is even better. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Public Service Enterprise Group (of which 1 doesn't sit too well with us!) you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.