Parsley Energy, Inc. (NYSE:PE) shareholders should be happy to see the share price up 19% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 48% in the last three years, falling well short of the market return.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Parsley Energy became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.
With a rather small yield of just 0.7% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 49% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Parsley Energy further; while we may be missing something on this analysis, there might also be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Parsley Energy will earn in the future (free profit forecasts).
A Different Perspective
Parsley Energy provided a TSR of 27% over the last twelve months. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 2.4% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Parsley Energy by clicking this link.
Parsley Energy is not the only stock that insiders are buying. 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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