National Fuel Gas (NYSE:NFG) shareholders have earned a 6.2% CAGR over the last five years
The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But National Fuel Gas Company (NYSE:NFG) has fallen short of that second goal, with a share price rise of 13% over five years, which is below the market return. Looking at the last year alone, the stock is up 7.2%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for National Fuel Gas
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, National Fuel Gas achieved compound earnings per share (EPS) growth of 8.2% per year. The EPS growth is more impressive than the yearly share price gain of 2% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.99.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how National Fuel Gas has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling National Fuel Gas stock, you should check out this FREE detailed 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, National Fuel Gas' TSR for the last 5 years was 35%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
National Fuel Gas shareholders gained a total return of 11% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 6% over half a decade This suggests the company might be improving over 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. Take risks, for example - National Fuel Gas has 3 warning signs we think you should be aware of.
If you are like me, then you will not want to miss this free list of undervalued small caps 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com