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Can You Imagine How Genel Energy's (LON:GENL) Shareholders Feel About The 91% Share Price Increase?

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Simply Wall St
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One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Genel Energy plc (LON:GENL) share price is up 91% in the last three years, clearly besting than the market return of around 4.7% (not including dividends).

See our latest analysis for Genel Energy

Because Genel Energy is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over the last three years Genel Energy has grown its revenue at 25% annually. That's much better than most loss-making companies. While the compound gain of 24% per year over three years is pretty good, you might argue it doesn't fully reflect the strong revenue growth. So now might be the perfect time to put Genel Energy on your radar. A window of opportunity may reveal itself with time, if the business can trend to profitability.

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

LSE:GENL Income Statement, September 6th 2019
LSE:GENL Income Statement, September 6th 2019

This free interactive report on Genel Energy's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Genel Energy's TSR for the last 3 years was 99%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Investors in Genel Energy had a tough year, with a total loss of 14% (including dividends), against a market gain of about 3.2%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 26% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Before forming an opinion on Genel Energy you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

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.

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.

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. Thank you for reading.