Yahoo Finance Keyera's (TSE:KEY) investors will be pleased with their splendid 146% return over the last three years
By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Keyera Corp. (TSE:KEY) shareholders have seen the share price rise 99% over three years, well in excess of the market return (55%, not including dividends).
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Keyera
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over the last three years, Keyera failed to grow earnings per share, which fell 12% (annualized).
So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.
We doubt the dividend payments explain the share price rise, since we don't see any improvement in that regard. It's much more likely that the fact that Keyera has been growing revenue at 30% a year is seen as a genuine positive. In that case, the revenue growth might be more important to shareholders, for now, thus justifying a higer share price.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Keyera's financial health with this free report on its balance sheet.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Keyera's TSR for the last 3 years was 146%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While it's certainly disappointing to see that Keyera shares lost 1.0% throughout the year, that wasn't as bad as the market loss of 8.1%. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 4 warning signs we've spotted with Keyera (including 1 which is a bit unpleasant) .
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.
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