Avance Gas Holding (OB:AGAS) ascends 7.7% this week, taking five-year gains to 522%

The last three months have been tough on Avance Gas Holding Ltd (OB:AGAS) shareholders, who have seen the share price decline a rather worrying 33%. 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 177% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Only time will tell if there is still too much optimism currently reflected in the share price.

Since it's been a strong week for Avance Gas Holding shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Avance Gas Holding

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

During the last half decade, Avance Gas Holding became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Avance Gas Holding share price has gained 159% in three years. During the same period, EPS grew by 55% each year. This EPS growth is higher than the 37% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 2.71.

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

It is of course excellent to see how Avance Gas Holding has grown profits over the years, but the future is more important for shareholders. This free interactive report on Avance Gas Holding's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Avance Gas Holding, it has a TSR of 522% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Avance Gas Holding shareholders have received a total shareholder return of 49% over the last year. And that does include the dividend. That's better than the annualised return of 44% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Avance Gas Holding better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Avance Gas Holding you should be aware of, and 3 of them shouldn't be ignored.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 Norwegian 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.