New Jersey Resources (NYSE:NJR) shareholders have earned a 10% CAGR over the last five years

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 New Jersey Resources Corporation (NYSE:NJR) has fallen short of that second goal, with a share price rise of 36% over five years, which is below the market return. Meanwhile, the last twelve months saw the share price rise 4.9%.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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 five years of share price growth, New Jersey Resources achieved compound earnings per share (EPS) growth of 19% per year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.30.

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

We know that New Jersey Resources has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on New Jersey Resources' balance sheet strength 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, New Jersey Resources' TSR for the last 5 years was 63%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

New Jersey Resources shareholders are up 8.9% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 10% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand New Jersey Resources better, we need to consider many other factors. Even so, be aware that New Jersey Resources is showing 2 warning signs in our investment analysis , and 1 of those is significant...

But note: New Jersey Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.