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EnQuest PLC (LON:ENQ) shareholders might be concerned after seeing the share price drop 17% in the last quarter. But that doesn't change the fact that the returns over the last three years have been very strong. The share price marched upwards over that time, and is now 120% higher than it was. After a run like that some may not be surprised to see prices moderate. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for EnQuest
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.
EnQuest became profitable within the last three years. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that EnQuest has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling EnQuest stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market lost about 0.7% in the twelve months, EnQuest shareholders did even worse, losing 42%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand EnQuest better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with EnQuest (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.