Red Eléctrica Corporación's (BME:REE) Shareholders Are Down 13% On Their Shares

Most people feel a little frustrated if a stock they own goes down in price. But often it is not a reflection of the fundamental business performance. The Red Eléctrica Corporación, S.A. (BME:REE) is down 13% over a year, but the total shareholder return is -8.5% once you include the dividend. And that total return actually beats the market decline of 12%. At least the damage isn't so bad if you look at the last three years, since the stock is down 7.3% in that time. Unhappily, the share price slid 2.1% in the last week.

View our latest analysis for Red Eléctrica Corporación

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unhappily, Red Eléctrica Corporación had to report a 3.1% decline in EPS over the last year. This reduction in EPS is not as bad as the 13% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized 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 Red Eléctrica Corporación'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Red Eléctrica Corporación's TSR for the last year was -8.5%, 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

Although it hurts that Red Eléctrica Corporación returned a loss of 8.5% in the last twelve months, the broader market was actually worse, returning a loss of 12%. Longer term investors wouldn't be so upset, since they would have made 1.4%, each year, over five years. 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 Red Eléctrica Corporación better, we need to consider many other factors. For example, we've discovered 2 warning signs for Red Eléctrica Corporación that you should be aware of before investing here.

We will like Red Eléctrica Corporación 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 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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