By buying an index fund, you can roughly match the market return with ease.  But many of us dare to dream of bigger returns, and build a portfolio ourselves.  For example, CenterPoint Energy, Inc. (NYSE:CNP) shareholders have seen the share price rise 25% over three years, well in excess of the market return (19%, not including dividends).    

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.  

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance.  By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

CenterPoint Energy was able to grow its EPS at 33% per year over three years, sending the share price higher.   The average annual share price increase of 8% is actually lower than the EPS growth.  Therefore, it seems the market has moderated its expectations for growth, somewhat.  

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

NYSE:CNP Earnings Per Share Growth March 28th 2024

We consider it positive that insiders have made significant purchases in the last year.  Even so, future earnings will be far more important to whether current shareholders make money.  Dive deeper into the earnings by checking this interactive graph of CenterPoint Energy's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR).  The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs.  It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend.  We note that for CenterPoint Energy the TSR over the last 3 years was 35%, 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

While the broader market gained around 31% in the last year, CenterPoint Energy shareholders lost 0.7% (even including dividends).  However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period.     Longer term investors wouldn't be so upset, since they would have made 1.3%, each year, over five years.  It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend.        It's always interesting to track share price performance over the longer term. But to understand CenterPoint Energy better, we need to consider many other factors.   For example, we've discovered 2 warning signs for CenterPoint Energy (1 is concerning!) that you should be aware of before investing here.  

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies 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.