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The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Genesis Energy Limited (NZSE:GNE) shareholders for doubting their decision to hold, with the stock down 22% over a half decade.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
We've discovered 3 warning signs about Genesis Energy. View them for free.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
While the share price declined over five years, Genesis Energy actually managed to increase EPS by an average of 52% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
It's strange to see such muted share price performance despite sustained growth. Perhaps a clue lies in other metrics.
The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Genesis Energy has grown profits over the years, but the future is more important for shareholders. This free interactive report on Genesis Energy's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Genesis Energy, it has a TSR of 10% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!