Seplat Energy's (LON:SEPL) earnings growth rate lags the 44% CAGR delivered to shareholders

Seplat Energy Plc (LON:SEPL) shareholders have seen the share price descend 17% over the month. But that doesn't change the fact that shareholders have received really good returns over the last five years. We think most investors would be happy with the 298% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now.

Since the long term performance has been good but there's been a recent pullback of 5.0%, let's check if the fundamentals match the share price.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over half a decade, Seplat Energy managed to grow its earnings per share at 52% a year. The EPS growth is more impressive than the yearly share price gain of 32% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.48.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Seplat Energy has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Seplat Energy will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Seplat Energy's TSR for the last 5 years was 522%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Seplat Energy shareholders have received a total shareholder return of 25% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 44% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. To that end, you should learn about the 2 warning signs we've spotted with Seplat Energy (including 1 which is potentially serious) .

But note: Seplat 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.