Sempra (NYSE:SRE) shareholders have endured a 7.2% loss from investing in the stock a year ago

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. That downside risk was realized by Sempra (NYSE:SRE) shareholders over the last year, as the share price declined 10%. That falls noticeably short of the market return of around 25%. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 0.6% in three years.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.

See our latest analysis for Sempra

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…’ 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.

Even though the Sempra share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It’s surprising to see the share price fall so much, despite the improved EPS. So it’s easy to justify a look at some other metrics.

Sempra’s revenue is actually up 16% over the last year. Since we can’t easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growthearnings-and-revenue-growth

earnings-and-revenue-growth

Sempra is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Sempra, it has a TSR of -7.2% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 25% in the last year, Sempra shareholders lost 7.2% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example – Sempra has 2 warning signs we think you should be aware of.

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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