Unless you borrow money to invest, the potential losses are limited. But if you pick the right stock, you can make a lot more than 100%. For example, the Bonanza Creek Energy, Inc. (NYSE:BCEI) share price has soared 230% in the last year. Most would be very happy with that, especially in just one year! On top of that, the share price is up 46% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. Also impressive, the stock is up 35% over three years, making long term shareholders happy, too.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Bonanza Creek Energy was able to grow EPS by 51% in the last twelve months. This EPS growth is significantly lower than the 230% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Bonanza Creek Energy has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
We're pleased to report that Bonanza Creek Energy shareholders have received a total shareholder return of 230% over one year. That certainly beats the loss of about 13% 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 risks, for instance. Every company has them, and we've spotted 2 warning signs for Bonanza Creek Energy 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 US 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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