Falcon Minerals (NASDAQ:FLMN) shareholders have earned a 60% return over the last year
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 Falcon Minerals Corporation (NASDAQ:FLMN) share price is 43% higher than it was a year ago, much better than the market return of around 4.8% (not including dividends) in the same period. So that should have shareholders smiling. Zooming out, the stock is actually down 28% in the last three years.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Falcon Minerals
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).
Falcon Minerals went from making a loss to reporting a profit, in the last year.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
We note that the most recent dividend payment is higher than the payment a year ago, so that may have assisted the share price. Income-seeking investors probably helped bid up the stock price. Though we must add that the revenue growth of 48% year on year would have helped paint a pretty picture.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Falcon Minerals in this interactive graph of future profit estimates.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Falcon Minerals the TSR over the last 1 year was 60%, 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
We're pleased to report that Falcon Minerals rewarded shareholders with a total shareholder return of 60% over the last year. That's including the dividend. What is absolutely clear is that is far preferable to the dismal 1.7% average annual loss suffered over the last three years. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Falcon Minerals (of which 1 makes us a bit uncomfortable!) you should know about.
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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
