Warrior Met Coal's (NYSE:HCC) investors will be pleased with their strong 208% return over the last three years
Warrior Met Coal, Inc. (NYSE:HCC) shareholders might be concerned after seeing the share price drop 19% in the last month. In contrast, the return over three years has been impressive. The share price marched upwards over that time, and is now 181% higher than it was. So the recent fall in the share price should be viewed in that context. Only time will tell if there is still too much optimism currently reflected in the share price.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Warrior Met Coal
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Warrior Met Coal was able to grow its EPS at 28% per year over three years, sending the share price higher. This EPS growth is lower than the 41% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. That's not necessarily surprising considering the three-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Warrior Met Coal has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Warrior Met Coal will grow revenue in the future.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Warrior Met Coal the TSR over the last 3 years was 208%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Although it hurts that Warrior Met Coal returned a loss of 6.4% in the last twelve months, the broader market was actually worse, returning a loss of 12%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 15% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Warrior Met Coal (of which 1 makes us a bit uncomfortable!) you should know about.
Of course Warrior Met Coal may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
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