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Unless you borrow money to invest, the potential losses are limited. But if you pick the right stock, you can make a lot more than 100%. For example, the Birchcliff Energy Ltd. (TSE:BIR) share price has soared 278% return in just a single year. It's also good to see the share price up 63% over the last 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. And shareholders have also done well over the long term, with an increase of 98% in the last three years.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
View our latest analysis for Birchcliff Energy
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
During the last year Birchcliff Energy grew its earnings per share, moving from a loss to a profit.
When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).
We are skeptical of the suggestion that the 0.3% dividend yield would entice buyers to the stock. However the year on year revenue growth of 50% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. 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 Birchcliff Energy the TSR over the last 1 year was 281%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!