Ratio Energies – Limited Partnership’s (TLV:RATI) annual shareholder returns are below the company’s 79% year-on-year earnings growth
The easiest way to invest in stocks is to buy exchange-traded funds. But you can do better than that by picking better-than-average stocks (as part of a diversified portfolio). For example, the Ratio Energies – Limited Partnership (TLV: RAT) the stock price has risen 65% over the past year, clearly outperforming the market decline of around 9.8% (excluding dividends). If he can maintain this outperformance over the long term, investors will do very well! However, longer-term returns have not been as impressive, with the stock rising just 3.6% over the past three years.
Although the past week hurt the company’s year-over-year performance, let’s take a look at recent trends in underlying activity and see if the gains have lined up.
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are overly reactive dynamic systems and that investors are not always rational. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).
Ratio Energies – Limited Partnership was able to increase EPS by 79% over the last twelve months. It’s fair to say that the 65% gain in share price has not kept pace with EPS growth. So it looks like the market has cooled down on Ratio Energies – Limited Partnership, despite the growth. Interesting. This cautious sentiment is reflected in its (rather low) P/E ratio of 8.08.
You can see how EPS has changed over time in the image below (click on the graph to see the exact values).
It’s probably worth noting that the CEO is paid less than the median at companies of a similar size. It’s always worth keeping an eye on CEO compensation, but a more important question is whether the company will grow its profits over the years. Dive deeper into earnings by viewing this interactive chart from Ratio Energies – Limited Partnership’s profit, turnover and cash flow.
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, assuming the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. In the case of Ratio Energies – Limited Partnership, it has a TSR of 73% over 1 year. This exceeds the performance of its share price that we mentioned earlier. The dividends paid by the company thus inflated the total return to shareholders.
A different perspective
It is good to see that shareholders of Ratio Energies – Limited Partnership have received a total shareholder return of 73% over the past year. And that includes the dividend. This gain is better than the five-year annual TSR, which is 2%. Therefore, it seems that the sentiment around the company has been positive lately. Someone with an optimistic outlook might see the recent improvement in TSR as indicating that the company itself is improving over time. It is always interesting to follow the evolution of the share price over the long term. But to better understand Ratio Energies – Limited Partnership, we need to consider many other factors. Example: we have identified 2 warning signs for Ratio Energies – Limited Partnership you should be aware of, and 1 of them is potentially serious.
Sure, you might find a fantastic investment by looking elsewhere. So take a look at this free list of companies that we believe will increase their profits.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on IL exchanges.
Valuation is complex, but we help make it simple.
Find out if Ratio Energies – Limited partnership is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.