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For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Range Resources Corporation (NYSE:RRC) share price has soared 864% over five years. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 25% in about a quarter. It really delights us to see such great share price performance for investors.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
Check out our latest analysis for Range Resources
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During the last half decade, Range Resources became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Range Resources' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Range Resources the TSR over the last 5 years was 890%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Range Resources provided a TSR of 25% over the year (including dividends). That's fairly close to the broader market return. It has to be noted that the recent return falls short of the 58% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Range Resources a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand Range Resources better, we need to consider many other factors. For example, we've discovered 1 warning sign for Range Resources that you should be aware of before investing here.