Civitas Resources (NYSE:CIVI) sheds 17% this week, as yearly returns fall more in line with earnings growth

The last three months have been tough on Civitas Resources, Inc. (NYSE:CIVI) shareholders, who have seen the share price decline a rather worrying 39%. But the silver lining is the stock is up over five years. However we are not very impressed because the share price is only up 88%, less than the market return of 107%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 61% decline over the last twelve months.

Since the long term performance has been good but there's been a recent pullback of 17%, let's check if the fundamentals match the share price.

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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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Civitas Resources achieved compound earnings per share (EPS) growth of 23% per year. This EPS growth is higher than the 13% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 3.25 also suggests market apprehension.

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

This free interactive report on Civitas Resources' earnings, revenue and cash flow 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. As it happens, Civitas Resources' TSR for the last 5 years was 162%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Civitas Resources had a tough year, with a total loss of 58% (including dividends), against a market gain of about 4.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 21% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. To that end, you should learn about the 3 warning signs we've spotted with Civitas Resources (including 1 which is a bit concerning) .

We will like Civitas Resources better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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