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The three-year decline in earnings might be taking its toll on Polaris Renewable Energy (TSE:PIF) shareholders as stock falls 12% over the past week

Polaris Renewable Energy Inc. (TSE:PIF) shareholders have seen the share price descend 15% over the month. But at least the stock is up over the last three years. In that time, it is up 24%, which isn't bad, but not amazing either.

Although Polaris Renewable Energy has shed US$44m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Polaris Renewable Energy

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 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).

Over the last three years, Polaris Renewable Energy failed to grow earnings per share, which fell 42% (annualized).

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. 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. Many investors probably think the fact that Polaris Renewable Energy's revenue has been declining at a rate of 7.3% per year is a real negative. And to be fair, we don't see how EPS can grow sustainably without a boost to revenue.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Polaris Renewable Energy, it has a TSR of 44% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While it's certainly disappointing to see that Polaris Renewable Energy shares lost 0.9% throughout the year, that wasn't as bad as the market loss of 4.6%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 5% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Polaris Renewable Energy better, we need to consider many other factors. For example, we've discovered 4 warning signs for Polaris Renewable Energy (2 are a bit concerning!) that you should be aware of before investing here.

We will like Polaris Renewable Energy better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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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