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Unless you borrow money to invest, the potential losses are limited. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Patterson-UTI Energy, Inc. (NASDAQ:PTEN) share price has soared 101% return in just a single year. On top of that, the share price is up 46% in about a quarter. It is also impressive that the stock is up 61% over three years, adding to the sense that it is a real winner.
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.
Check out our latest analysis for Patterson-UTI Energy
Patterson-UTI Energy wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year Patterson-UTI Energy saw its revenue grow by 109%. That's a head and shoulders above most loss-making companies. Meanwhile, the market has paid attention, sending the share price soaring 101% in response. That sort of revenue growth is bound to attract attention, even if the company doesn't turn a profit. The strong share price rise indicates optimism, so there may be a better opportunity for buyers as the hype fades a bit.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Patterson-UTI Energy is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Patterson-UTI Energy 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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Patterson-UTI Energy's TSR for the last 1 year was 104%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!