It might be of some concern to shareholders to see the Topaz Energy Corp. (TSE:TPZ) share price down 13% in the last month. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. In that time we've seen the stock easily surpass the market return, with a gain of 26%.
Although Topaz Energy has shed CA$229m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
Topaz Energy was able to grow EPS by 162% in the last twelve months. It's fair to say that the share price gain of 26% did not keep pace with the EPS growth. So it seems like the market has cooled on Topaz Energy, despite the growth. Interesting. Of course, with a P/E ratio of 86.98, the market remains optimistic.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Topaz 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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Topaz Energy's TSR for the last 1 year was 32%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Topaz Energy shareholders should be happy with the total gain of 32% over the last twelve months, including dividends. That's better than the more recent three month gain of 1.5%, implying that share price has plateaued recently. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Topaz Energy , and understanding them should be part of your investment process.
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.
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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.