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There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the DTE Energy Company (NYSE:DTE), share price is up over the last year, but its gain of 19% trails the market return. Looking back further, the share price is 16% higher than it was three years ago.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
View our latest analysis for DTE Energy
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
DTE Energy was able to grow EPS by 22% in the last twelve months. We note that the earnings per share growth isn't far from the share price growth (of 19%). That suggests that the market sentiment around the company hasn't changed much over that time. It looks like the share price is responding to the EPS.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that DTE Energy has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for DTE Energy the TSR over the last 1 year was 24%, 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
DTE Energy provided a TSR of 24% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 7% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand DTE Energy better, we need to consider many other factors. Even so, be aware that DTE Energy is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...