Yahoo Finance Birchcliff Energy's (TSE:BIR) investors will be pleased with their impressive 123% return over the last three years
By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Birchcliff Energy Ltd. (TSE:BIR) shareholders have seen the share price rise 91% over three years, well in excess of the market return (13%, not including dividends).
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Birchcliff Energy
We don't think that Birchcliff Energy's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
Over the last three years Birchcliff Energy has grown its revenue at 13% annually. That's a very respectable growth rate. The share price gain of 24% per year shows that the market is paying attention to this growth. If that's the case, then it could be well worth while to research the growth trajectory. Keep in mind that the strength of the balance sheet impacts the options open to the company.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Birchcliff Energy the TSR over the last 3 years was 123%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in Birchcliff Energy had a tough year, with a total loss of 23% (including dividends), against a market gain of about 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 13% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Birchcliff Energy better, we need to consider many other factors. Even so, be aware that Birchcliff Energy is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
