The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. To wit, the Seplat Energy Plc (LON:SEPL) share price has flown 141% in the last three years. That sort of return is as solid as granite. In the last week the share price is up 1.0%.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Seplat Energy
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Seplat Energy was able to grow its EPS at 17% per year over three years, sending the share price higher. In comparison, the 34% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That’s not necessarily surprising considering the three-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Seplat Energy has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Seplat Energy will grow revenue in the future.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Seplat Energy’s TSR for the last 3 years was 214%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
It’s nice to see that Seplat Energy shareholders have received a total shareholder return of 73% over the last year. Of course, that includes the dividend. That’s better than the annualised return of 21% 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. It’s always interesting to track share price performance over the longer term. But to understand Seplat Energy better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 1 warning sign with Seplat Energy , and understanding them should be part of your investment process.
