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Can You Imagine How Baker Hughes' (NYSE:BKR) Shareholders Feel About The 59% Share Price Increase?

One way to deal with stock volatility is to ensure you have a properly diverse portfolio. Of course, the aim of the game is to pick stocks that do better than an index fund. One such company is Baker Hughes Company (NYSE:BKR), which saw its share price increase 59% in the last year, slightly above the market return of around 52% (not including dividends). Unfortunately the longer term returns are not so good, with the stock falling 40% in the last three years.

See our latest analysis for Baker Hughes

Baker Hughes wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last year Baker Hughes saw its revenue shrink by 15%. Despite the lack of revenue growth, the stock has returned a solid 59% the last twelve months. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
earnings-and-revenue-growth

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. If you are thinking of buying or selling Baker Hughes stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Baker Hughes the TSR over the last year was 65%, 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 Baker Hughes has rewarded shareholders with a total shareholder return of 65% in the last twelve months. And that does include the dividend. That certainly beats the loss of about 4% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Baker Hughes better, we need to consider many other factors. For example, we've discovered 1 warning sign for Baker Hughes that you should be aware of before investing here.

Baker Hughes is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.

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