Shareholders in Ithaca Energy (LON:ITH) are in the red if they invested a year ago

It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Ithaca Energy plc (LON:ITH) share price is down 27% in the last year. That's well below the market return of 9.1%. We wouldn't rush to judgement on Ithaca Energy because we don't have a long term history to look at.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Ithaca Energy

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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Ithaca Energy managed to increase earnings per share from a loss to a profit, over the last 12 months.

The result looks like a strong improvement to us, so we're surprised the market has sold down the shares. If the improved profitability is a sign of things to come, then right now may prove the perfect time to pop this stock on your watchlist.

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 Ithaca Energy has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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 Ithaca Energy the TSR over the last 1 year was -9.4%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Given that the market gained 9.1% in the last year, Ithaca Energy shareholders might be miffed that they lost 9.4% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 2.1% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Ithaca Energy (of which 3 shouldn't be ignored!) you should know about.

But note: Ithaca Energy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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