U.S. Markets closed
  • S&P Futures

    4,131.50
    -1.25 (-0.03%)
     
  • Dow Futures

    33,533.00
    -37.00 (-0.11%)
     
  • Nasdaq Futures

    13,965.75
    -10.00 (-0.07%)
     
  • Russell 2000 Futures

    2,224.30
    -0.60 (-0.03%)
     
  • Crude Oil

    60.63
    +0.45 (+0.75%)
     
  • Gold

    1,745.20
    -2.40 (-0.14%)
     
  • Silver

    25.48
    +0.05 (+0.21%)
     
  • EUR/USD

    1.1962
    +0.0007 (+0.0598%)
     
  • 10-Yr Bond

    1.6230
    -0.0520 (-3.10%)
     
  • Vix

    16.65
    -0.26 (-1.54%)
     
  • GBP/USD

    1.3764
    +0.0012 (+0.0867%)
     
  • USD/JPY

    108.8710
    -0.1770 (-0.1623%)
     
  • BTC-USD

    63,159.75
    +2,583.98 (+4.27%)
     
  • CMC Crypto 200

    1,360.79
    +66.80 (+5.16%)
     
  • FTSE 100

    6,890.49
    +1.37 (+0.02%)
     
  • Nikkei 225

    29,649.85
    -101.76 (-0.34%)
     

Did Changing Sentiment Drive Marathon Petroleum's (NYSE:MPC) Share Price Down By 18%?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
·3 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the Marathon Petroleum Corporation (NYSE:MPC) share price slid 18% over twelve months. That contrasts poorly with the market return of 24%. On the bright side, the stock is actually up 9.7% in the last three years. It's down 20% in about a quarter.

See our latest analysis for Marathon Petroleum

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Unhappily, Marathon Petroleum had to report a 43% decline in EPS over the last year. This fall in the EPS is significantly worse than the 18% the share price fall. It may have been that the weak EPS was not as bad as some had feared.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

NYSE:MPC Past and Future Earnings, January 28th 2020
NYSE:MPC Past and Future Earnings, January 28th 2020

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. This free interactive report on Marathon Petroleum's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Marathon Petroleum, it has a TSR of -15% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 24% in the last year, Marathon Petroleum shareholders lost 15% (even including dividends) . Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 5.0% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Be aware that Marathon Petroleum is showing 5 warning signs in our investment analysis , you should know about...

Marathon Petroleum 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.