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Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Cenovus Energy Inc. (TSE:CVE) share price is up 92% in the last year, clearly besting the market return of around 34% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Unfortunately the longer term returns are not so good, with the stock falling 19% in the last three years.
See our latest analysis for Cenovus Energy
There is no denying that markets are sometimes efficient, but prices do not always reflect 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 Cenovus Energy saw its earnings per share (EPS) drop below zero. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.
We are skeptical of the suggestion that the 0.6% dividend yield would entice buyers to the stock. Unfortunately Cenovus Energy's fell 3.8% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Cenovus Energy will earn in the future (free profit forecasts).
A Different Perspective
We're pleased to report that Cenovus Energy shareholders have received a total shareholder return of 93% over one year. And that does include the dividend. Notably the five-year annualised TSR loss of 6% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Cenovus Energy better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Cenovus Energy you should know about.