While it may not be enough for some shareholders, we think it is good to see the Ithaca Energy plc (LON:ITH) share price up 11% in a single quarter. But in truth the last year hasn’t been good for the share price. In fact the stock is down 17% in the last year, well below the market return.
The recent uptick of 5.9% could be a positive sign of things to come, so let’s take a look at historical fundamentals.
View our latest analysis for Ithaca 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 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.
Ithaca Energy managed to increase earnings per share from a loss to a profit, over the last 12 months.
The result looks like a strong improvement to us, so we’re surprised the market has sold down the shares. If the improved profitability is a sign of things to come, then right now may prove the perfect time to pop this stock on your watchlist.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. In the case of Ithaca Energy, it has a TSR of -4.1% for the last 1 year. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Given that the market gained 18% in the last year, Ithaca Energy shareholders might be miffed that they lost 4.1% (even including dividends). While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. It’s great to see a nice little 11% rebound in the last three months. Let’s just hope this isn’t the widely-feared ‘dead cat bounce’ (which would indicate further declines to come). It’s always interesting to track share price performance over the longer term. But to understand Ithaca Energy better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Ithaca Energy you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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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