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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Cabot Oil & Gas Corporation (NYSE:COG), since the last five years saw the share price fall 33%.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Cabot Oil & Gas became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
We don't think that the 1.4% is big factor in the share price, since it's quite small, as dividends go. In contrast to the share price, revenue has actually increased by 1.8% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
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. You can see what analysts are predicting for Cabot Oil & Gas in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Cabot Oil & Gas's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Cabot Oil & Gas shareholders, and that cash payout explains why its total shareholder loss of 31%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
Cabot Oil & Gas shareholders gained a total return of 9.7% during the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 7.1% per year, over five years. So this might be a sign the business has turned its fortunes around. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Cabot Oil & Gas 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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.