NiSource (NYSE:NI) stock performs better than its underlying earnings growth over last year

The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the NiSource Inc. (NYSE:NI) share price is 49% higher than it was a year ago, much better than the market return of around 24% (not including dividends) in the same period. That's a solid performance by our standards! And shareholders have also done well over the long term, with an increase of 41% in the last three years.

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

See our latest analysis for NiSource

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 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).

NiSource was able to grow EPS by 3.4% in the last twelve months. This EPS growth is significantly lower than the 49% increase in the share price. This indicates that the market is now more optimistic about the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on NiSource's earnings, revenue and cash flow.

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. As it happens, NiSource's TSR for the last 1 year was 54%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that NiSource shareholders have received a total shareholder return of 54% over one year. And that does include the dividend. That's better than the annualised return of 9% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - NiSource has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.