Low-cost index funds make it easy to achieve average market returns. But if you invest in individual stocks, some are likely to underperform. That’s what has happened with the TC Energy Corporation (TSE:TRP) share price. It’s up 15% over three years, but that is below the market return. In the last year the stock has gained 11%.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years of share price growth, TC Energy actually saw its earnings per share (EPS) drop 16% per year.
The strong decline in earnings per share suggests the market isn’t using EPS to judge the company. Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
Interestingly, the dividend has increased over time; so that may have given the share price a boost. It could be that the company is reaching maturity and dividend investors are buying for the yield.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling TC Energy stock, you should check out this free report showing analyst profit forecasts.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for TC Energy the TSR over the last 3 years was 35%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
TC Energy provided a TSR of 17% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that’s still a gain, and it’s actually better than the average return of 5% over half a decade This suggests the company might be improving over time. It’s always interesting to track share price performance over the longer term. But to understand TC Energy better, we need to consider many other factors. To that end, you should learn about the 6 warning signs we’ve spotted with TC Energy (including 1 which shouldn’t be ignored) .
TC Energy is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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.
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