Does Petrolina (Holdings)'s (CSE:PHL) Share Price Gain of 28% Match Its Business Performance?

Diversification is a key tool for dealing with stock price volatility. But the goal is to pick stocks that do better than average. One such company is Petrolina (Holdings) Public Ltd (CSE:PHL), which saw its share price increase 28% in the last year, slightly above the market return of around 25% (not including dividends). Unfortunately the longer term returns are not so good, with the stock falling 11% in the last three years.

See our latest analysis for Petrolina (Holdings)

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 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.

During the last year, Petrolina (Holdings) actually saw its earnings per share drop 21%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

For starters, we suspect the share price has been buoyed by the dividend, which was increased during the year. It could be that the company is reaching maturity and dividend investors are buying for the yield, pushing the price up in the process.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Petrolina (Holdings) stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Petrolina (Holdings)'s TSR for the last year was 34%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Petrolina (Holdings) has rewarded shareholders with a total shareholder return of 34% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 9% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Petrolina (Holdings) better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Petrolina (Holdings) you should be aware of, and 2 of them are significant.

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 CY exchanges.

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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. 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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