Reflecting on Tamar Petroleum's (TLV:TMRP) Share Price Returns Over The Last Three Years

Tamar Petroleum Ltd (TLV:TMRP) shareholders will doubtless be very grateful to see the share price up 34% in the last quarter. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 86% in that time. So it's about time shareholders saw some gains. But the more important question is whether the underlying business can justify a higher price still.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for Tamar Petroleum

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years that the share price fell, Tamar Petroleum's earnings per share (EPS) dropped by 23% each year. This reduction in EPS is slower than the 48% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 0.87.

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

This free interactive report on Tamar Petroleum's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Tamar Petroleum's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Tamar Petroleum's TSR of was a loss of 81% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

The last twelve months weren't great for Tamar Petroleum shares, which performed worse than the market, costing holders 66%. Meanwhile, the broader market slid about 5.7%, likely weighing on the stock. The three-year loss of 22% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. Take risks, for example - Tamar Petroleum has 3 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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