Did the Electricité de France (EPA: EDF) share price deserve to gain 14%?
There is no doubt that investing in the stock market is a really brilliant way to build wealth. But if you choose this route, you will buy stocks below the market. Over the past year, the Electricité de France SA (EPA: EDF) The stock price is up 14%, but that’s less than the broader market return. Unfortunately, long-term returns aren’t that good, with the stock falling 11% in the past three years.
See our latest analysis for Electricité de France
While the markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying corporate performance. An imperfect but reasonable way to gauge how sentiment is changing around a company is to compare earnings per share (EPS) with the stock price.
Over the past year, Électricité de France has indeed seen its earnings per share fall by 94%.
So we don’t think investors are paying too much attention to BPAs. This is because when EPS is going down but the stock price is going up, it often means that the market is taking other factors into account.
We doubt that the modest dividend yield of 1.9% is doing much to support the share price. Unfortunately, that of Electricité de France fell by 3.2% over twelve months. Thus, fundamental metrics do not provide an obvious explanation for the stock price gain.
The image below shows how revenue and income have tracked over time (if you click on the image you can see more details).
Electricité de France is a well-known title, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling shares of Electricité de France, you should check out this free report showing analysts’ consensus estimates for future earnings.
What about dividends?
In addition to measuring stock price performance, investors should also consider the total shareholder return (TSR). TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spinoff. Arguably, the TSR gives a more complete picture of the return generated by a stock. It turns out that Electricité de France’s TSR for last year was 16%, which exceeds the share price return mentioned above. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
Electricité de France has provided a TSR of 16% over the last twelve months. But it was below the market average. On the plus side, it’s still a payoff, and it’s actually better than the 5% average return over half a decade. This suggests that the business could improve over time. While it is worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Concrete example: we have spotted 4 warning signs for Electricité de France you must be aware.
We will like Electricité de France better if we see large insider buys. In the meantime, watch this free list of growing companies with significant and recent insider buying.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks that currently trade on FR stock exchanges.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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