Investors in Byron Energy (ASX:BYE) have unfortunately lost 72% over the last three years
As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of Byron Energy Limited (ASX:BYE); the share price is down a whopping 72% in the last three years. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 27% in the last year. Furthermore, it's down 27% in about a quarter. That's not much fun for holders.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Byron 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 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.
During the unfortunate three years of share price decline, Byron Energy actually saw its earnings per share (EPS) improve by 35% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We note that, in three years, revenue has actually grown at a 25% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Byron Energy further; while we may be missing something on this analysis, there might also be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Byron Energy's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 5.3% in the last year, Byron Energy shareholders lost 27%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - Byron Energy has 1 warning sign we think you should be aware of.
Byron Energy is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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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