Yahoo Finance Investors in Marathon Petroleum (NYSE:MPC) have seen strong returns of 279% over the past five years
It hasn't been the best quarter for Marathon Petroleum Corporation (NYSE:MPC) shareholders, since the share price has fallen 14% in that time. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 218% in that time. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
See our latest analysis for Marathon Petroleum
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last half decade, Marathon Petroleum became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
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. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. 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 279% for the last 5 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 52% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 31% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Even so, be aware that Marathon Petroleum is showing 3 warning signs in our investment analysis , and 1 of those is concerning...
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
