Investors in Engie (EPA:ENGI) have seen solid returns of 165% over the past five years

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Engie SA (EPA:ENGI) share price is up 81% in the last 5 years, clearly besting the market return of around 42% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 57% in the last year, including dividends.

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.

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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.

Over half a decade, Engie managed to grow its earnings per share at 37% a year. This EPS growth is higher than the 13% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.89.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Engie has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Engie will grow revenue in the future.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Engie, it has a TSR of 165% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Engie shareholders have received a total shareholder return of 57% over the last year. That's including the dividend. That's better than the annualised return of 22% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Engie better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Engie .

Of course Engie may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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