How Much Did Enagás'(BME:ENG) Shareholders Earn From Share Price Movements Over The Last Five Years?

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Enagás, S.A. (BME:ENG) shareholders for doubting their decision to hold, with the stock down 28% over a half decade.

View our latest analysis for Enagás

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Looking back five years, both Enagás' share price and EPS declined; the latter at a rate of 0.5% per year. This reduction in EPS is less than the 6% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 11.84.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Enagás, it has a TSR of -8.0% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

The total return of 8.1% received by Enagás shareholders over the last year isn't far from the market return of -8.5%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 1.6% per year over the last five years. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs of a turnaround. 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. To that end, you should learn about the 4 warning signs we've spotted with Enagás (including 2 which is are significant) .

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 ES exchanges.

When trading Enagás or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.