Pine Cliff Energy (TSE:PNE) shareholders have earned a 86% CAGR over the last three years
For us, stock picking is in large part the hunt for the truly magnificent stocks. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. For example, the Pine Cliff Energy Ltd. (TSE:PNE) share price is up a whopping 460% in the last three years, a handsome return for long term holders. It's down 3.4% in the last seven days.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Pine Cliff 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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During three years of share price growth, Pine Cliff Energy moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Pine Cliff Energy has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Pine Cliff Energy's financial health with this free report on its balance sheet.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Pine Cliff Energy the TSR over the last 3 years was 543%, 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
It's good to see that Pine Cliff Energy has rewarded shareholders with a total shareholder return of 4.5% in the last twelve months. That's including the dividend. However, that falls short of the 43% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Pine Cliff Energy , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.
