Yahoo Finance Is Peyto Exploration & Development's (TSE:PEY) Share Price Gain Of 277% Well Earned?
Peyto Exploration & Development Corp. (TSE:PEY) shareholders might be concerned after seeing the share price drop 11% in the last month. But that doesn't detract from the splendid returns of the last year. During that period, the share price soared a full 277%. So it may be that the share price is simply cooling off after a strong rise. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.
Check out our latest analysis for Peyto Exploration & Development
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year Peyto Exploration & Development saw its earnings per share (EPS) drop below zero. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.
We are skeptical of the suggestion that the 0.8% dividend yield would entice buyers to the stock. Unfortunately Peyto Exploration & Development's fell 17% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.
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 good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Peyto Exploration & Development stock, you should check out this free report showing analyst profit forecasts.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Peyto Exploration & Development's TSR for the last year was 282%, 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
We're pleased to report that Peyto Exploration & Development shareholders have received a total shareholder return of 282% over one year. Of course, that includes the dividend. That certainly beats the loss of about 12% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Peyto Exploration & Development you should be aware of, and 1 of them is significant.
Peyto Exploration & Development is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
This article by Simply Wall St is general in nature. 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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