It is a pleasure to report that the Tourmaline Oil Corp. (TSE:TOU) is up 39% in the last quarter. But if you look at the last five years the returns have not been good. In fact, the share price is down 46%, which falls well short of the return you could get by buying an index fund.
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. 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 five years over which the share price declined, Tourmaline Oil's earnings per share (EPS) dropped by 33% each year. The share price decline of 12% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve. The high P/E ratio of 74.18 suggests that shareholders believe earnings will grow in the years ahead.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Tourmaline Oil's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Tourmaline Oil's TSR for the last 5 years was -42%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Tourmaline Oil has rewarded shareholders with a total shareholder return of 30% in the last twelve months. Of course, that includes the dividend. That certainly beats the loss of about 7.2% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Tourmaline Oil better, we need to consider many other factors. To that end, you should be aware of the 4 warning signs we've spotted with Tourmaline Oil .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.
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