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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. Long term Epsilon Energy Ltd. (NASDAQ:EPSN) shareholders would be well aware of this, since the stock is up 126% in five years. On the other hand, the stock price has retraced 8.5% in the last week.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Epsilon Energy actually saw its EPS drop 23% per year.
Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
On the other hand, Epsilon Energy's revenue is growing nicely, at a compound rate of 7.2% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Epsilon Energy stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, Epsilon Energy's TSR for the last 5 years was 160%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Epsilon Energy shareholders have received a total shareholder return of 26% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 21%. 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. For example, we've discovered 3 warning signs for Epsilon Energy (2 are significant!) that you should be aware of before investing here.