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Did You Participate In Any Of Seplat Petroleum Development's (LON:SEPL) Respectable 70% Return?

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·3 min read
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Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Seplat Petroleum Development Company Plc (LON:SEPL) share price is 50% higher than it was a year ago, much better than the market return of around 21% (not including dividends) in the same period. So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 35% in the last three years.

View our latest analysis for Seplat Petroleum Development

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.

Seplat Petroleum Development went from making a loss to reporting a profit, in the last year.

We think the growth looks very prospective, so we're not surprised the market liked it too. Inflection points like this can be a great time to take a closer look at a company.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

Dive deeper into Seplat Petroleum Development's key metrics by checking this interactive graph of Seplat Petroleum Development's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Seplat Petroleum Development the TSR over the last year was 70%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Seplat Petroleum Development has rewarded shareholders with a total shareholder return of 70% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Seplat Petroleum Development better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Seplat Petroleum Development (including 1 which is a bit unpleasant) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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 (at) simplywallst.com.