Earnings are growing at Veolia Environnement (EPA:VIE) but shareholders still don't like its prospects

Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Veolia Environnement SA (EPA:VIE) shareholders, since the share price is down 15% in the last three years, falling well short of the market decline of around 7.0%. The falls have accelerated recently, with the share price down 10% in the last three months.

With the stock having lost 3.6% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Veolia Environnement

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.

Although the share price is down over three years, Veolia Environnement actually managed to grow EPS by 16% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Veolia Environnement has actually grown its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Veolia Environnement is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Veolia Environnement stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Veolia Environnement the TSR over the last 3 years was -3.5%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 0.8% in the twelve months, Veolia Environnement shareholders did even worse, losing 3.7% (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. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Veolia Environnement better, we need to consider many other factors. Even so, be aware that Veolia Environnement is showing 4 warning signs in our investment analysis , and 1 of those is potentially serious...

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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.