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Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. To wit, the Geo Energy Resources share price has climbed 92% in five years, easily topping the market decline of 10% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 3.1% in the last year, including dividends.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
View our latest analysis for Geo Energy Resources
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 half decade, Geo Energy Resources became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. 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). 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. As it happens, Geo Energy Resources' TSR for the last 5 years was 253%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Geo Energy Resources shareholders gained a total return of 3.1% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 29% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Geo Energy Resources better, we need to consider many other factors. For instance, we've identified 2 warning signs for Geo Energy Resources (1 is concerning) that you should be aware of.