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ARC Resources' (TSE:ARX) Shareholders Are Down 63% On Their Shares

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Simply Wall St
·3 min read
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We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the ARC Resources Ltd. (TSE:ARX) share price dropped 63% in the last half decade. That's an unpleasant experience for long term holders. But it's up 9.3% in the last week.

View our latest analysis for ARC Resources

Because ARC Resources made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last half decade, ARC Resources saw its revenue increase by 3.4% per year. That's far from impressive given all the money it is losing. This lacklustre growth has no doubt fueled the loss of 10% per year, in that time. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in ARC Resources. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling ARC Resources stock, you should check out this free report showing analyst profit forecasts.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, ARC Resources' TSR for the last 5 years was -53%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that ARC Resources has rewarded shareholders with a total shareholder return of 4.5% in the last twelve months. And that does include the dividend. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that ARC Resources is showing 1 warning sign in our investment analysis , you should know about...

ARC Resources is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.