In This Article:
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For instance the ConocoPhillips (NYSE:COP) share price is 168% higher than it was three years ago. Most would be happy with that. Meanwhile the share price is 3.7% higher than it was a week ago.
Since the stock has added US$4.7b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for ConocoPhillips
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).
ConocoPhillips was able to grow its EPS at 58% per year over three years, sending the share price higher. The average annual share price increase of 39% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 8.21 also reflects the negative sentiment around the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, ConocoPhillips' TSR for the last 3 years was 201%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that ConocoPhillips shareholders have received a total shareholder return of 36% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 13% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with ConocoPhillips (at least 1 which is concerning) , and understanding them should be part of your investment process.