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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the Chevron Corporation (NYSE:CVX) share price is up 53% in the last 1 year, clearly besting the market decline of around 23% (not including dividends). So that should have shareholders smiling. Looking back further, the stock price is 48% higher than it was three years ago.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Chevron
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the last year Chevron grew its earnings per share (EPS) by 242%. This EPS growth is significantly higher than the 53% increase in the share price. So it seems like the market has cooled on Chevron, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.16.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Chevron has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Chevron stock, you should check out this FREE detailed report on its balance sheet.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Chevron, it has a TSR of 58% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Chevron shareholders have received a total shareholder return of 58% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 12%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Chevron better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Chevron (of which 1 is potentially serious!) you should know about.