The past three years for Enel Américas (SNSE:ENELAM) investors has not been profitable

By
Simply Wall St
Published
January 12, 2022
SNSE:ENELAM
Source: Shutterstock

No-one enjoys it when they lose money on a stock. But no-one can make money on every call, especially in a declining market. The Enel Américas S.A. (SNSE:ENELAM) is down 29% over three years, but the total shareholder return is -19% once you include the dividend. That's better than the market which declined 21% over the last three years.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Enel Américas

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Enel Américas saw its EPS decline at a compound rate of 15% per year, over the last three years. In comparison the 11% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
SNSE:ENELAM Earnings Per Share Growth January 12th 2022

Dive deeper into Enel Américas' key metrics by checking this interactive graph of Enel Américas's earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Enel Américas' TSR for the last 3 years was -19%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 4.8% in the twelve months, Enel Américas shareholders did even worse, losing 17% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 0.3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Enel Américas that you should be aware of before investing here.

We will like Enel Américas 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 CL exchanges.

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