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The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But Clearway Energy, Inc. (NYSE:CWEN.A) has fallen short of that second goal, with a share price rise of 41% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 24% over the last year.
While the stock has fallen 6.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
View our latest analysis for Clearway Energy
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last half decade, Clearway Energy became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Clearway Energy share price is down 18% in the last three years. In the same period, EPS is up 27% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -7% per year.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Clearway Energy's TSR for the last 5 years was 82%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Clearway Energy shareholders have received returns of 33% over twelve months (even including dividends), which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 13% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand Clearway Energy better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Clearway Energy (including 1 which is a bit concerning) .