Low-cost index funds make it easy to achieve average market returns. But if you invest in individual stocks, some are likely to underperform. That’s what has happened with the ConocoPhillips Company (NYSE:COP) share price. It’s up 24% over three years, but that is below the market return. In the last year the stock has gained 6.6%.
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, ConocoPhillips moved from a loss to profitability. That would generally be considered a positive, so we’d expect the share price to be up.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how ConocoPhillips has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling ConocoPhillips stock, you should check out this FREE detailed report on its balance sheet.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for ConocoPhillips the TSR over the last 3 years was 32%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
ConocoPhillips shareholders gained a total return of 8.9% during the year. But that was short of the market average. On the bright side, that’s still a gain, and it’s actually better than the average return of 0.9% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. 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. For example, we’ve discovered 4 warning signs for ConocoPhillips (of which 1 is major) which any shareholder or potential investor should be aware of.
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 US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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