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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the Energean plc (LON:ENOG) share price is up 14% in the last 1 year, clearly besting the market return of around 6.9% (not including dividends). So that should have shareholders smiling. However, the stock hasn't done so well in the longer term, with the stock only up 8.9% in three years.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
See our latest analysis for Energean
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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year Energean grew its earnings per share, moving from a loss to a profit.
When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).
We haven't seen Energean increase dividend payments yet, so the yield probably hasn't helped drive the share higher. Rather, we'd posit that the revenue increase of 118% might be more meaningful. Revenue growth often does precede earnings growth, so some investors might be willing to forgo profits today because they have their eyes fixed firmly on the future.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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. You can see what analysts are predicting for Energean in this interactive graph of future profit estimates.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Energean, it has a TSR of 25% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!