Stocks for the Long Run: Public Service Enterprise vs. the S&P 500

Investing isn't easy. Even Warren Buffett counsels that most investors should invest in a low-cost index like the S&P 500. That way, "you'll be buying into a wonderful industry, which in effect is all of American industry," he says.

But there are, of course, companies whose long-term fortunes differ substantially from the index. In this series, we look at how individual stocks have performed against the broad S&P 500.

Step on up, Public Service Enterprise (NYSE: PEG  ) .

Public Service Enterprise shares have matched the S&P 500 over the last quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 9.8% a year, compared with 9.7% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1987 would be worth $19,200 today. In Public Service Enterprise, it'd be worth $20,100.

Now, have a look at how Public Service Enterprise earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

Some underperformance here. Since 1995, Public Service Enterprise's earnings per share have grown by an average of 5.4% a year, compared with 6% a year growth for the broader index.

What's that meant for valuations? Public Service Enterprise has traded for an average of 13 times earnings since 1987 -- below the 24 times earnings for the broader S&P 500.

Through it all, shares have been average performers over the last quarter-century.

Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks Public Service Enterprise with a five-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add Public Service Enterprise to My Watchlist


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12/19/2014 4:08 PM
PEG $42.07 Down -0.20 -0.47%
Public Service Ent… CAPS Rating: *****

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