Naturgy Energy Group (BME:NTGY) Has Compensated Shareholders With A Respectable 70% Return On Their Investment

Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Naturgy Energy Group share price has climbed 33% in five years, easily topping the market decline of 2.9% (ignoring dividends).

See our latest analysis for Naturgy Energy Group

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, Naturgy Energy Group 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).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Naturgy Energy Group's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Naturgy Energy Group's TSR for the last 5 years was 70%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Although it hurts that Naturgy Energy Group returned a loss of 1.4% in the last twelve months, the broader market was actually worse, returning a loss of 9.9%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 11% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Naturgy Energy Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Naturgy Energy Group (of which 2 make us uncomfortable!) you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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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.
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