EDP - Energias de Portugal (ELI:EDP) Has Gifted Shareholders With A Fantastic 131% Total Return On Their Investment

By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the EDP - Energias de Portugal, S.A. (ELI:EDP) share price is up 90% in the last three years, clearly besting the market return of around 14% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 20% , including dividends .

Check out our latest analysis for EDP - Energias de Portugal

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.

Over the last three years, EDP - Energias de Portugal failed to grow earnings per share, which fell 32% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Therefore, we think it's worth considering other metrics as well.

The revenue drop of 5.8% is as underwhelming as some politicians. The only thing that's clear is there is low correlation between EDP - Energias de Portugal's share price and its historic fundamental data. Further research may be required!

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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. So it makes a lot of sense to check out what analysts think EDP - Energias de Portugal will earn in the future (free profit forecasts).

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of EDP - Energias de Portugal, it has a TSR of 131% for the last 3 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 EDP - Energias de Portugal shareholders have received a total shareholder return of 20% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 21% per year, is even more impressive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for EDP - Energias de Portugal (of which 1 is significant!) you should know about.

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 PT exchanges.

If you decide to trade EDP - Energias de Portugal, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all 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 (at) simplywallst.com.