Yahoo Finance Investors more bullish on Kinder Morgan (NYSE:KMI) this week as stock ascends 3.2%, despite earnings trending downwards over past year
On average, over time, stock markets tend to rise higher. This makes investing attractive. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the Kinder Morgan, Inc. (NYSE:KMI), share price is up over the last year, but its gain of 19% trails the market return. However, the longer term returns haven't been so impressive, with the stock up just 5.2% in the last three years.
Since it's been a strong week for Kinder Morgan shareholders, let's have a look at trend of the longer term fundamentals.
See our latest analysis for Kinder Morgan
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the last year, Kinder Morgan actually saw its earnings per share drop 2.9%.
Sometimes companies will sacrifice EPS in the short term for longer term gains; and in that case we may be able to find other positives. It makes sense to check some of the other fundamental data for an explanation of the share price rise.
We haven't seen Kinder Morgan increase dividend payments yet, so the yield probably hasn't helped drive the share higher. It saw it's revenue decline by 19% over twelve months. It's fair to say we're a little surprised to see the share price up, and that makes us cautious.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
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. In the case of Kinder Morgan, it has a TSR of 27% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Kinder Morgan's TSR for the year was broadly in line with the market average, at 27%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 6%. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Kinder Morgan (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.
But note: Kinder Morgan may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
