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Can You Imagine How Gulf Keystone Petroleum's (LON:GKP) Shareholders Feel About The 73% Share Price Increase?

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·2-min read
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If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Gulf Keystone Petroleum Limited (LON:GKP) share price is up 73% in the last year, clearly besting the market return of around 16% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 16% lower than it was three years ago.

See our latest analysis for Gulf Keystone Petroleum

Gulf Keystone Petroleum wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Gulf Keystone Petroleum actually shrunk its revenue over the last year, with a reduction of 47%. Despite the lack of revenue growth, the stock has returned a solid 73% the last twelve months. To us that means that there isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Gulf Keystone Petroleum will earn in the future (free profit forecasts).

A Different Perspective

We're pleased to report that Gulf Keystone Petroleum shareholders have received a total shareholder return of 73% over one year. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

Gulf Keystone Petroleum is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

This article by Simply Wall St is general in nature. 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 (at) simplywallst.com.

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