When you buy a stock, there is always a chance that it will drop by 100%. But on the bright side, you can earn well over 100% with a really good stock. A good example is Gazprom Neft public joint stock company (MCX: SIBN) which has seen its share price increase by 180% in five years. It has also increased by 13% in about a month. But that could be related to good market conditions – shares in its market have risen 5.5% in the past month.
The past week has turned out to be lucrative for Gazprom Neft investors, so let’s see if fundamentals have boosted the company’s performance over five years.
See our latest analysis for Gazprom Neft
In his essay Graham-and-Doddsville super-investors Warren Buffett described how stock prices don’t always rationally reflect a company’s value. An imperfect but straightforward way to consider how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
Over the five years of share price growth, Gazprom Neft has achieved compound earnings per share (EPS) growth of 30% per year. EPS growth is more impressive than the 23% annual share price gain over the same period. So it looks like the market isn’t that keen on the stock these days. The reasonably low P / E ratio of 7.17 also suggests some apprehension in the market.
The image below shows how EPS has tracked over time (if you click on the image you can see more detail).
We know Gazprom Neft has improved its results lately, but will it increase its revenues? This free A report showing analysts’ revenue forecasts should help you determine if EPS growth can be sustained.
What about dividends?
In addition to measuring stock price performance, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. Arguably, the TSR gives a more complete picture of the return generated by a stock. It turns out that Gazprom Neft’s TSR over the past 5 years was 293%, which exceeds the share price return mentioned above. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
It is nice to see that Gazprom Neft shareholders have received a total shareholder return of 74% over the past year. And that includes the dividend. As the 1-year TSR is better than the 5-year TSR (the latter standing at 31% per year), it seems that the performance of the stock has improved in recent times. Someone with an optimistic outlook might view the recent improvement in TSR as indicating that the business itself is improving over time. I find it very interesting to look at the long-term share price as an indicator of company performance. But to really understand better, we have to take other information into account as well. Like risks, for example. Every business has them, and we’ve spotted 2 warning signs for Gazprom Neft (1 of which is a bit unpleasant!) to know.
If you are like me then you not want to miss it free list of growing companies that insiders buy.
Please note that the market returns quoted in this article reflect the average market weighted returns of stocks currently trading on UK stock exchanges.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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