Marathon Petroleum's (NYSE:MPC) 90% CAGR outpaced the company's earnings growth over the same three-year period
We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. One bright shining star stock has been Marathon Petroleum Corporation (NYSE:MPC), which is 508% higher than three years ago. On top of that, the share price is up 15% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. It really delights us to see such great share price performance for investors.
Since it's been a strong week for Marathon Petroleum shareholders, let's have a look at trend of the longer term fundamentals.
See our latest analysis for Marathon Petroleum
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Marathon Petroleum achieved compound earnings per share growth of 127% per year. This EPS growth is higher than the 82% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.92.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Marathon Petroleum has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Marathon Petroleum's financial health with this free report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Marathon Petroleum, it has a TSR of 584% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Marathon Petroleum has rewarded shareholders with a total shareholder return of 63% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 17%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Marathon Petroleum is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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