Investors in Cardinal Energy (TSE:CJ) have seen massive returns of 619% over the past three years
It hasn't been the best quarter for Cardinal Energy Ltd. (TSE:CJ) shareholders, since the share price has fallen 13% in that time. But that doesn't change the fact that the returns over the last three years have been spectacular. The longer term view reveals that the share price is up 520% in that period. So the recent fall doesn't do much to dampen our respect for the business. The share price action could signify that the business itself is dramatically improved, in that time. It really delights us to see such great share price performance for investors.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Cardinal Energy
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.
Cardinal Energy became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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 Cardinal Energy the TSR over the last 3 years was 619%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Cardinal Energy had a tough year, with a total loss of 9.8% (including dividends), against a market gain of about 3.5%. 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. Longer term investors wouldn't be so upset, since they would have made 30%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Cardinal Energy better, we need to consider many other factors. Even so, be aware that Cardinal Energy is showing 1 warning sign in our investment analysis , you should know about...
Cardinal Energy 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 Canadian 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.
