Even though Frontera Energy (TSE:FEC) has lost CA$61m market cap in last 7 days, shareholders are still up 90% over 5 years

Frontera Energy Corporation (TSE:FEC) shareholders might be concerned after seeing the share price drop 12% in the last week. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 81%, less than the market return of 96%. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 25% drop, in the last year.

Since the long term performance has been good but there's been a recent pullback of 12%, let's check if the fundamentals match the share price.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last half decade, Frontera Energy became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Frontera Energy's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Frontera Energy the TSR over the last 5 years was 90%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Frontera Energy had a tough year, with a total loss of 22% (including dividends), against a market gain of about 19%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 14%, 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. For instance, we've identified 2 warning signs for Frontera Energy that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian 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.