Societatea Energetica Electrica (BVB:EL) grows 3.2% this week, taking three-year gains to 240%

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Societatea Energetica Electrica S.A. (BVB:EL) share price has soared 228% in the last three years. That sort of return is as solid as granite. On top of that, the share price is up 33% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

The past week has proven to be lucrative for Societatea Energetica Electrica investors, so let's see if fundamentals drove the company's three-year performance.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years of share price growth, Societatea Energetica Electrica moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how Societatea Energetica Electrica has grown profits over the years, but the future is more important for shareholders. This free interactive report on Societatea Energetica Electrica's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Societatea Energetica Electrica's TSR for the last 3 years was 240%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Societatea Energetica Electrica has rewarded shareholders with a total shareholder return of 93% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Even so, be aware that Societatea Energetica Electrica is showing 2 warning signs in our investment analysis , you should know about...

We will like Societatea Energetica Electrica better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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