When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the PDC Energy, Inc. (NASDAQ:PDCE) share price has soared 133% in the last 1 year. Most would be very happy with that, especially in just one year! It's also up 22% in about a month. Looking back further, the stock price is 68% higher than it was three years ago.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
We don't think that PDC Energy's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
PDC Energy grew its revenue by 77% last year. That's stonking growth even when compared to other loss-making stocks. And the share price has responded, gaining 133% as we previously mentioned. It's great to see strong revenue growth, but the question is whether it can be sustained. Given the positive sentiment around the stock we're cautious, but there's no doubt its worth watching.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that PDC Energy has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on PDC Energy
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of PDC Energy, it has a TSR of 137% for the last 1 year. 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 PDC Energy shareholders have received a total shareholder return of 137% over the last year. And that does include the dividend. That certainly beats the loss of about 4% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with PDC Energy (at least 1 which is concerning) , and understanding them should be part of your investment process.
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 US exchanges.
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.