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Would Shareholders Who Purchased EnQuest's (LON:ENQ) Stock Three Years Be Happy With The Share price Today?

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Simply Wall St
·4 min read
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EnQuest PLC (LON:ENQ) shareholders will doubtless be very grateful to see the share price up 45% in the last quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 46% in the last three years, significantly under-performing the market.

See our latest analysis for EnQuest

EnQuest isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

In the last three years, EnQuest saw its revenue grow by 29% per year, compound. That is faster than most pre-profit companies. The share price drop of 13% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It's possible that the prior share price assumed unrealistically high future growth. Still, with high hopes now tempered, now might prove to be an opportunity to buy.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on EnQuest

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between EnQuest's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that EnQuest's TSR, at -37% is higher than its share price return of -46%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

We regret to report that EnQuest shareholders are down 33% for the year. Unfortunately, that's worse than the broader market decline of 3.0%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 7%, 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with EnQuest (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

EnQuest 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 GB exchanges.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.