Xcel Energy’s (NASDAQ:XEL) investors will be pleased with its 23% return over the past year

On average, stock markets tend to rise higher over time. This makes investment attractive. But if you choose that path, you will buy some shares that are not in the market. During the last year Xcel Energy Inc. (NASDAQ:XEL) share price is up 18%, but that’s less than the broader market’s return. Long-term returns haven’t been all that impressive, however, with the stock up just 9.2% over the past three years.

Now, it’s also worth looking at the company’s fundamentals, because that will help us determine whether long-term shareholder returns have matched the performance of the underlying business.

See our latest analysis for Xcel Energy

To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. A flawed but reasonable way to assess how the mood around a company has changed is to compare earnings per share. share (EPS) with the share price.

Xcel Energy was able to grow EPS by 6.6% in the last twelve months. This EPS growth is significantly lower than the 18% increase in the share price. This indicates that the market is now more optimistic about the share.

The image below shows how EPS has tracked over time (if you click on the image, you can see more details).

Before buying or selling a stock, we always recommend a careful study of historical growth trends, which are available here.

What about dividends?

In addition to measuring stock price return, investors should also consider total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often quite a bit higher than the share price return. We note that for Xcel Energy, the TSR over the last 1 year was 23%, which is better than the share price return mentioned above. And there’s no premium for guessing that dividend payments largely explain the divergence!

Another perspective

Xcel Energy delivered a TSR of 23% over the last twelve months. But it was below the market average. The upside is that the gain was actually better than the average annual return of 6% per year over five years. This could indicate that the company is winning over new investors as it pursues its strategy. I find it very interesting to look at stock price over the long term as a proxy for business performance. But to really gain insight, we need to consider other information as well. Like risks, for example. All companies have them and we have seen them 3 warning signs for Xcel Energy (1 of which should not be ignored!) you should know about.

But note: Xcel Energy may not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note that the market returns provided in this article reflect the market weighted average returns for stocks currently trading on US exchanges.

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This article by Simply Wall St is general. We only provide commentary based on historical data and analyst forecasts using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any shares and does not take into account your goals or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not take into account recent price-sensitive company announcements or qualitative material. Simply Wall St has no position in any listed stocks.