The three-year returns for Exelon's (NASDAQ:EXC) shareholders have been , yet its earnings growth was even better

As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Exelon Corporation (NASDAQ:EXC) shareholders have had that experience, with the share price dropping 28% in three years, versus a market return of about 22%.

While the stock has risen 3.1% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Exelon

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Although the share price is down over three years, Exelon actually managed to grow EPS by 15% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. 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.

Revenue is actually up 6.5% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Exelon further; while we may be missing something on this analysis, there might also be an opportunity.

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

Exelon is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Exelon in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Exelon, it has a TSR of 13% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Exelon shareholders gained a total return of 5.4% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 8% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Exelon (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.