Yahoo Finance Harbour Energy (LON:HBR) adds UK£212m to market cap in the past 7 days, though investors from a year ago are still down 13%
Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Harbour Energy plc (LON:HBR) shareholders over the last year, as the share price declined 16%. That contrasts poorly with the market decline of 1.5%. Because Harbour Energy hasn't been listed for many years, the market is still learning about how the business performs. It's down 19% in about a quarter.
Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.
View our latest analysis for Harbour Energy
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Harbour Energy managed to increase earnings per share from a loss to a profit, over the last 12 months.
The result looks like a strong improvement to us, so we're surprised the market has sold down the shares. If the improved profitability is a sign of things to come, then right now may prove the perfect time to pop this stock on your watchlist.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Harbour Energy has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Harbour Energy will grow revenue in the future.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Harbour Energy's TSR for the last 1 year was -13%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Harbour Energy shareholders are down 13% for the year (even including dividends), even worse than the market loss of 1.5%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. It's worth noting that the last three months did the real damage, with a 19% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. 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. For example, we've discovered 4 warning signs for Harbour Energy (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
But note: Harbour Energy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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