Yahoo Finance Investors who have held TransAlta Renewables (TSE:RNW) over the last year have watched its earnings decline along with their investment
The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in TransAlta Renewables Inc. (TSE:RNW) have tasted that bitter downside in the last year, as the share price dropped 36%. That falls noticeably short of the market decline of around 2.0%. However, the longer term returns haven't been so bad, with the stock down 26% in the last three years. Unfortunately the share price momentum is still quite negative, with prices down 18% in thirty days.
On a more encouraging note the company has added CA$96m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.
See our latest analysis for TransAlta Renewables
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Unfortunately TransAlta Renewables reported an EPS drop of 49% for the last year. This fall in the EPS is significantly worse than the 36% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for TransAlta Renewables the TSR over the last 1 year was -32%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market lost about 2.0% in the twelve months, TransAlta Renewables shareholders did even worse, losing 32% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. It could be that the recent sell-off is an opportunity, 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. To that end, you should learn about the 3 warning signs we've spotted with TransAlta Renewables (including 1 which doesn't sit too well with us) .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only 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 stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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