While shareholders of National Fuel Gas (NYSE:NFG) are in the red over the last year, underlying earnings have actually grown
Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in National Fuel Gas Company (NYSE:NFG) have tasted that bitter downside in the last year, as the share price dropped 24%. That falls noticeably short of the market return of around 8.2%. On the other hand, the stock is actually up 22% over three years.
While the stock has risen 3.3% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
View our latest analysis for National Fuel Gas
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 the unfortunate twelve months during which the National Fuel Gas share price fell, it actually saw its earnings per share (EPS) improve by 13%. It could be that the share price was previously over-hyped.
It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.
National Fuel Gas' revenue is actually up 6.3% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how National Fuel Gas has grown profits over the years, but the future is more important for shareholders. This free interactive report on National Fuel Gas' balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for National Fuel Gas the TSR over the last 1 year was -22%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in National Fuel Gas had a tough year, with a total loss of 22% (including dividends), against a market gain of about 8.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 3%, 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. Take risks, for example - National Fuel Gas has 2 warning signs we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
