The 4.1% return this week takes Clearway Energy's (NYSE:CWEN.A) shareholders five-year gains to 87%

If you buy and hold a stock for many years, you'd hope to be making a profit. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Clearway Energy, Inc. (NYSE:CWEN.A) share price is up 46% in the last five years, that's less than the market return. Some buyers are laughing, though, with an increase of 27% in the last year.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Clearway 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years of share price growth, Clearway Energy moved from a loss to profitability. 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 23% in the last three years. Meanwhile, EPS is up 53% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -8% per year.

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

It is of course excellent to see how Clearway Energy has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Clearway Energy the TSR over the last 5 years was 87%, 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

Clearway Energy's TSR for the year was broadly in line with the market average, at 36%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 13% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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. For instance, we've identified 3 warning signs for Clearway Energy (1 is a bit unpleasant) that you should be aware of.

We will like Clearway Energy better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.