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The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Portland General Electric Company (NYSE:POR), since the last five years saw the share price fall 16%.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for Portland General Electric
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the unfortunate half decade during which the share price slipped, Portland General Electric actually saw its earnings per share (EPS) improve by 7.5% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
It's strange to see such muted share price performance despite sustained growth. Perhaps a clue lies in other metrics.
The steady dividend doesn't really explain why the share price is down. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that Portland General Electric has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Portland General Electric in this interactive graph of future profit estimates.
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. As it happens, Portland General Electric's TSR for the last 5 years was 2.4%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.