Shareholders Of Prime Oil Chemical Service (TPE:2904) Must Be Happy With Their 70% Return

You can receive the average market return by buying a low-cost index fund. But you can make better returns by buying undervalued shares. To wit, Prime Oil Chemical Service Corporation (TPE:2904) shares are up 41% in three years, besting the market return. Zooming in, the stock is up a respectable 13% in the last year.

View our latest analysis for Prime Oil Chemical Service

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During three years of share price growth, Prime Oil Chemical Service achieved compound earnings per share growth of 20% per year. The average annual share price increase of 12% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 11.83 also reflects the negative sentiment around the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Prime Oil Chemical Service's key metrics by checking this interactive graph of Prime Oil Chemical Service's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Prime Oil Chemical Service, it has a TSR of 70% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Prime Oil Chemical Service provided a TSR of 21% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 8% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Prime Oil Chemical Service better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Prime Oil Chemical Service you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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