Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. For example, the ENGIE Eps S.A. (EPA:EPS) share price is down 29% in the last year. That’s disappointing when you consider the market returned 2.3%. On the bright side, the stock is actually up 11% in the last three years. Unfortunately the share price momentum is still quite negative, with prices down 19% in thirty days. But this could be related to poor market conditions — stocks are down 13% in the same time.
Check out our latest analysis for ENGIE Eps
Given that ENGIE Eps didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last twelve months, ENGIE Eps increased its revenue by 122%. That’s a strong result which is better than most other loss making companies. Given the revenue growth, the share price drop of 29% seems quite harsh. Our sympathies to shareholders who are now underwater. Prima facie, revenue growth like that should be a good thing, so it’s worth checking whether losses have stabilized. Our brains have evolved to think in linear fashion, so there’s value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
ENXTPA:EPS Income Statement, March 9th 2020
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
We’ve already covered ENGIE Eps’s share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that ENGIE Eps’s TSR, at -29% is higher than its share price return of -29%. When you consider it hasn’t been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
ENGIE Eps shareholders are down 29% for the year, but the broader market is up 2.3%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 5.2% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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. Even so, be aware that ENGIE Eps is showing 4 warning signs in our investment analysis , and 1 of those is a bit unpleasant…
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR exchanges.
If you spot an error that warrants correction, please contact the editor at [email protected]. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.