Investors in Gibson Energy (TSE:GEI) have unfortunately lost 7.1% over the last year
It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the Gibson Energy Inc. (TSE:GEI) share price slid 14% over twelve months. That contrasts poorly with the market decline of 2.4%. At least the damage isn't so bad if you look at the last three years, since the stock is down 0.9% in that time.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Gibson Energy
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the unfortunate twelve months during which the Gibson Energy share price fell, it actually saw its earnings per share (EPS) improve by 11%. It could be that the share price was previously over-hyped.
It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.
Gibson Energy's dividend seems healthy to us, so we doubt that the yield is a concern for the market. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that Gibson Energy has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Gibson Energy in this interactive graph of future profit estimates.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Gibson Energy the TSR over the last 1 year was -7.1%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in Gibson Energy had a tough year, with a total loss of 7.1% (including dividends), against a market gain of about 2.4%. 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 6%, 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. 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. Even so, be aware that Gibson Energy is showing 3 warning signs in our investment analysis , and 1 of those is significant...
But note: Gibson Energy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
