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If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term APA Corporation (NASDAQ:APA) shareholders. So they might be feeling emotional about the 60% share price collapse, in that time. The more recent news is of little comfort, with the share price down 49% in a year. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Our free stock report includes 2 warning signs investors should be aware of before investing in APA. Read for free now.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
APA saw its EPS decline at a compound rate of 5.1% per year, over the last three years. The share price decline of 26% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 6.96.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on APA's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for APA the TSR over the last 3 years was -56%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
APA shareholders are down 47% for the year (even including dividends), but the market itself is up 9.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For instance, we've identified 2 warning signs for APA that you should be aware of.