Yahoo Finance Select Energy Services (NYSE:WTTR) adds US$73m to market cap in the past 7 days, though investors from five years ago are still down 57%
While it may not be enough for some shareholders, we think it is good to see the Select Energy Services, Inc. (NYSE:WTTR) share price up 15% in a single quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 58% in that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. We'd err towards caution given the long term under-performance.
On a more encouraging note the company has added US$73m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
Check out our latest analysis for Select Energy Services
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Select Energy Services became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
It could be that the revenue decline of 5.4% per year is viewed as evidence that Select Energy Services is shrinking. This has probably encouraged some shareholders to sell down the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Select Energy Services has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Select Energy Services stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's nice to see that Select Energy Services shareholders have received a total shareholder return of 36% over the last year. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. For instance, we've identified 3 warning signs for Select Energy Services that you should be aware of.
But note: Select Energy Services may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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