These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. A talented investor can beat the market with a diversified portfolio, but even then, some stocks will under-perform. The NiSource Inc. (NYSE:NI) stock price is down 45% over five years, but the total shareholder return is 63% once you include the dividend. That's better than the market which returned 25% over the same time. Even worse, it's down 22% in about a month, which isn't fun at all. We do note, however, that the broader market is down 29% in that period, and this may have weighed on the share price.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
During five years of share price growth, NiSource moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
Revenue is actually up 2.2% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that NiSource has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for NiSource in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 a lot higher than the share price return. We note that for NiSource the TSR over the last 5 years was 63%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
NiSource shareholders are down 15% over twelve months (even including dividends) , which isn't far from the market return of -16%. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand NiSource better, we need to consider many other factors. Even so, be aware that NiSource is showing 5 warning signs in our investment analysis , and 1 of those shouldn't be ignored...
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 US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.