Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. Anyone who held Crescent Point Energy Corp. (TSE:CPG) for five years would be nursing their metaphorical wounds since the share price dropped 87% in that time. And some of the more recent buyers are probably worried, too, with the stock falling 58% in the last year. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
Crescent Point Energy isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, Crescent Point Energy grew its revenue at 4.1% per year. That's not a very high growth rate considering it doesn't make profits. It's not so sure that share price crash of 13% per year is completely deserved, but the market is doubtless disappointed. We'd be pretty cautious about this one, although the sell-off may be too severe. A company like this generally needs to produce profits before it can find favour with new investors.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Crescent Point Energy will earn in the future (free profit forecasts).
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Crescent Point Energy's TSR for the last 5 years was -85%, 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
We regret to report that Crescent Point Energy shareholders are down 57% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.8%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Crescent Point Energy better, we need to consider many other factors. Take risks, for example - Crescent Point Energy has 2 warning signs we think you should be aware of.
Crescent Point Energy 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.
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