Xcel Energy's (NASDAQ:XEL) investors will be pleased with their 23% return over the last year

On average, over time, stock markets tend to rise higher. This makes investing attractive. But if you choose that path, you're going to buy some stocks that fall short of the market. Over the last year the Xcel Energy Inc. (NASDAQ:XEL) share price is up 18%, but that's less than the broader market return. However, the longer term returns haven't been so impressive, with the stock up just 9.2% in the last three years.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Xcel Energy

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Xcel Energy was able to grow EPS by 6.6% in the last twelve months. This EPS growth is significantly lower than the 18% increase in the share price. This indicates that the market is now more optimistic about the stock.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Xcel Energy the TSR over the last 1 year was 23%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Xcel Energy provided a TSR of 23% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 6% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Xcel Energy (of which 1 shouldn't be ignored!) you should know about.

But note: Xcel Energy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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