Is Pioneer Natural Resources' (NYSE:PXD) 117% Share Price Increase Well Justified?

By
Simply Wall St
Published
March 24, 2021
NYSE:PXD

When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Pioneer Natural Resources Company (NYSE:PXD) share price has soared 117% in the last year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 39% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. On the other hand, longer term shareholders have had a tougher run, with the stock falling 8.4% in three years.

Check out our latest analysis for Pioneer Natural Resources

Pioneer Natural Resources wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Pioneer Natural Resources actually shrunk its revenue over the last year, with a reduction of 27%. So we would not have expected the share price to rise 117%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NYSE:PXD Earnings and Revenue Growth March 24th 2021

Pioneer Natural Resources is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Pioneer Natural Resources stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Pioneer Natural Resources the TSR over the last year was 122%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Pioneer Natural Resources shareholders have received a total shareholder return of 122% over the last year. That's including the dividend. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Pioneer Natural Resources has 4 warning signs we think you should be aware of.

But note: Pioneer Natural Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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