Consolidated Edison's (NYSE:ED) five-year earnings growth trails the 9.8% YoY shareholder returns

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Consolidated Edison, Inc. (NYSE:ED) has fallen short of that second goal, with a share price rise of 32% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 23% in the last year.

The past week has proven to be lucrative for Consolidated Edison investors, so let's see if fundamentals drove the company's five-year performance.

Our free stock report includes 3 warning signs investors should be aware of before investing in Consolidated Edison. Read for free now.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Consolidated Edison achieved compound earnings per share (EPS) growth of 5.1% per year. This EPS growth is reasonably close to the 6% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Consolidated Edison's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Consolidated Edison's TSR for the last 5 years was 59%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Consolidated Edison shareholders have received a total shareholder return of 28% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Consolidated Edison better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Consolidated Edison you should be aware of, and 1 of them shouldn't be ignored.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

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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.