Magnolia Oil & Gas' (NYSE:MGY) investors will be pleased with their strong 147% return over the last year

By
Simply Wall St
Published
April 20, 2022
NYSE:MGY
Source: Shutterstock

Unless you borrow money to invest, the potential losses are limited. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Magnolia Oil & Gas Corporation (NYSE:MGY) share price had more than doubled in just one year - up 144%. It's also good to see the share price up 21% over the last quarter. Looking back further, the stock price is 87% higher than it was three years ago.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Check out our latest analysis for Magnolia Oil & Gas

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Magnolia Oil & Gas went from making a loss to reporting a profit, in the last year.

The result looks like a strong improvement to us, so we're not surprised the market likes the growth. Inflection points like this can be a great time to take a closer look at a company.

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

earnings-per-share-growth
NYSE:MGY Earnings Per Share Growth April 20th 2022

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Magnolia Oil & Gas' 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). 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. As it happens, Magnolia Oil & Gas' TSR for the last 1 year was 147%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Pleasingly, Magnolia Oil & Gas' total shareholder return last year was 147%. That includes the value of the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 24%. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand Magnolia Oil & Gas better, we need to consider many other factors. For instance, we've identified 1 warning sign for Magnolia Oil & Gas that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies 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 US exchanges.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.