Enaex's (SNSE:ENAEX) 16% CAGR outpaced the company's earnings growth over the same five-year period

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, long term Enaex S.A. (SNSE:ENAEX) shareholders have enjoyed a 61% share price rise over the last half decade, well in excess of the market decline of around 15% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 28% , including dividends .

The past week has proven to be lucrative for Enaex investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Enaex

Given that Enaex only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years Enaex saw its revenue grow at 24% per year. Even measured against other revenue-focussed companies, that's a good result. It's good to see that the stock has 10%, but not entirely surprising given revenue shows strong growth. If the strong revenue growth continues, we'd hope to see the share price to follow, in time. Of course, you'll have to research the business more fully to figure out if this is an attractive opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on Enaex's balance sheet strength is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Enaex's TSR for the last 5 years was 110%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Enaex's TSR for the year was broadly in line with the market average, at 28%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 16% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Enaex you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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