Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Innergex Renewable Energy Inc. (TSE:INE) shareholders have had that experience, with the share price dropping 53% in three years, versus a market return of about 25%. On the other hand the share price has bounced 6.6% over the last week.

While the stock has risen 6.6% in the past week but long term shareholders are still in the red, let’s see what the fundamentals can tell us.

Check out our latest analysis for Innergex Renewable Energy

Innergex Renewable Energy isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, Innergex Renewable Energy saw its revenue grow by 15% per year, compound. That’s a pretty good rate of top-line growth. So some shareholders would be frustrated with the compound loss of 15% per year. The market must have had really high expectations to be disappointed with this progress. It would be well worth taking a closer look at the company, to determine growth trends (and balance sheet strength).

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Innergex Renewable Energy the TSR over the last 3 years was -46%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Innergex Renewable Energy shareholders are up 19% for the year (even including dividends). But that was short of the market average. But at least that’s still a gain! Over five years the TSR has been a reduction of 4% per year, over five years. So this might be a sign the business has turned its fortunes around. It’s always interesting to track share price performance over the longer term. But to understand Innergex Renewable Energy better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Innergex Renewable Energy (of which 1 shouldn’t be ignored!) you should know about.

Story continues

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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