Investing in Clearway Energy (NYSE:CWEN.A) five years ago would have delivered you a 83% gain

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But Clearway Energy, Inc. (NYSE:CWEN.A) has fallen short of that second goal, with a share price rise of 40% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 30% over the last year.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During the last half decade, Clearway Energy became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Clearway Energy share price is down 1.2% in the last three years. During the same period, EPS grew by 80% each year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -0.4% a year for three years.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Clearway Energy's earnings, revenue and cash flow.

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 Clearway Energy, it has a TSR of 83% for the last 5 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

We're pleased to report that Clearway Energy shareholders have received a total shareholder return of 38% over one year. And that does include the dividend. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Clearway Energy better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Clearway Energy (of which 1 is a bit unpleasant!) you should know about.

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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 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.