It hasn't been the best quarter for Peabody Energy Corporation (NYSE:BTU) shareholders, since the share price has fallen 18% in that time. But over the last three years the stock has shone bright like a diamond. In fact, the share price has taken off in that time, up 516%. As long term investors the recent fall doesn't detract all that much from the longer term story. The thing to consider is whether there is still too much elation around the company's prospects. It really delights us to see such great share price performance for investors.
Although Peabody Energy has shed US$175m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During three years of share price growth, Peabody Energy moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We're pleased to report that Peabody Energy shareholders have received a total shareholder return of 1.7% over one year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Case in point: We've spotted 2 warning signs for Peabody Energy you should be aware of, and 1 of them can't be ignored.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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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