Epsilon Energy Ltd. (NASDAQ:EPSN) shareholders might be concerned after seeing the share price drop 13% in the last quarter. But over three years, the returns would have left most investors smiling In the last three years the share price is up, 78%: better than the market.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Epsilon Energy was able to grow its EPS at 44% per year over three years, sending the share price higher. This EPS growth is higher than the 21% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 9.45 also reflects the negative sentiment around the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Epsilon Energy's 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. In the case of Epsilon Energy, it has a TSR of 81% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Epsilon Energy has rewarded shareholders with a total shareholder return of 29% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Epsilon Energy better, we need to consider many other factors. Take risks, for example - Epsilon Energy has 1 warning sign we think you should be aware of.
If you are like me, then you will 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.
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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.
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