Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in CenterPoint Energy, Inc. (NYSE:CNP) have tasted that bitter downside in the last year, as the share price dropped 19%. That's well below the market return of 31%. Zooming out, the stock is down 18% in the last three years.
Because CenterPoint Energy made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
CenterPoint Energy grew its revenue by 41% over the last year. We think that is pretty nice growth. Meanwhile, the share price is down 19% over twelve months, which is disappointing given the progress made. You might even wonder if the share price was previously over-hyped. However, that's in the past now, and it's the future that matters most.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on CenterPoint Energy
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. As it happens, CenterPoint Energy's TSR for the last year was -16%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 31% in the last year, CenterPoint Energy shareholders lost 16% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - CenterPoint Energy has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.
CenterPoint Energy is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.
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