Texas Pacific Land (NYSE:TPL) shareholders have earned a 33% CAGR over the last five years
Shareholders of Texas Pacific Land Corporation (NYSE:TPL) may be worried after seeing the stock price drop 16% in the past month. But that doesn’t change the fact that shareholders have received really good returns over the past five years. In fact, the stock price is 277% higher today. In general, long-term returns will give you a better idea of the quality of the business than short periods can. The most important question is whether the stock is too cheap or too expensive today.
So let’s evaluate the fundamentals over the past 5 years and see if they have moved in step with shareholder returns.
Check out our latest analysis of Texas Pacific Land
While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying business performance. A flawed but reasonable way to gauge how sentiment around a company has changed is to compare earnings per share (EPS) to the stock price.
During five years of stock price growth, Texas Pacific Land achieved compounded earnings per share (EPS) of 39% per year. This EPS growth is higher than the 30% average annual increase in the share price. So, it can be concluded that the broader market has become more cautious about the stock.
The image below shows how EPS has tracked over time (click on the image to see larger details).
NYSE: TPL Earnings Per Share Growth Jan 15, 2023
It is good to see that there have been some significant domestic purchases in the last three months. This is a positive. That said, we think revenue and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historical growth trends, available here.
What about dividends?
In addition to measuring share price return, investors should also consider total shareholder return (TSR). TSR includes the value of any spin-off or capital increase discounted, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that TSR gives a more complete picture of dividend-paying stocks. As it happens, Texas Pacific Land’s TSR for the last 5 years was 309%, which exceeds the share price return mentioned earlier. This is mainly a result of its dividend payments!
A Different Perspective
We are pleased to report that Texas Pacific Land shareholders have received a total return of 93% over the year. And that includes the dividend. This return is better than the annualized TSR over five years, which is 33%. Therefore, it seems as if the sentiment around the company has been positive recently. Given that the share price momentum remains strong, it may be worth taking a closer look at the stock so you don’t miss an opportunity. It’s all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like buying stocks along with management, then you might just like this free company list. (Hint: insiders bought them).
Please note that the market returns quoted in this article reflect the weighted average market returns of stocks currently trading on US exchanges.
What are the risks and opportunities for Texas Pacific Land?
Texas Pacific Land Corporation engages in land and resource management, as well as water utility services and operations. Show more
See the full analysis
Earnings are expected to grow by 21.04% annually
Earnings have grown 16.5% annually over the past 5 years
No risks to TPL were detected by our risk controls.
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This article from 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 into account your financial objectives or situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not include the latest price-sensitive company announcements or quality materials. Simply Wall St has no position in any of the stocks mentioned.