Central Petroleum Limited (ASX:CTP) shareholders might be concerned after seeing the share price drop 11% in the last month. But that doesn't change the reality that over twelve months the stock has done really well. In that time we've seen the stock easily surpass the market return, with a gain of 28%.
Central Petroleum isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year Central Petroleum saw its revenue grow by 70%. That's well above most other pre-profit companies. While the share price gain of 28% over twelve months is pretty tasty, you might argue it doesn't fully reflect the strong revenue growth. So quite frankly it could be a good time to investigate Central Petroleum in some detail. Human beings have trouble conceptualizing (and valuing) exponential growth. Is that what we're seeing here?
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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. This free report showing analyst forecasts should help you form a view on Central Petroleum
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Central Petroleum's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Central Petroleum hasn't been paying dividends, but its TSR of 28% exceeds its share price return of 28%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's nice to see that Central Petroleum shareholders have received a total shareholder return of 28% over the last year. Notably the five-year annualised TSR loss of 4.7% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Central Petroleum by clicking this link.
Central Petroleum 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 AU exchanges.
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