Investing in CVR Energy (NYSE:CVI) three years ago would have delivered you a 220% gain

By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at CVR Energy, Inc. (NYSE:CVI), which is up 87%, over three years, soundly beating the market return of 16% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 27% , including dividends .

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for CVR Energy

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.

CVR Energy became profitable within the last three years. That would generally be considered a positive, so we’d expect the share price to be up.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growthearnings-per-share-growth

earnings-per-share-growth

We know that CVR Energy has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on CVR Energy’s balance sheet strength is a great place to start, if you want to investigate the stock further.

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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of CVR Energy, it has a TSR of 220% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

CVR Energy provided a TSR of 27% over the year (including dividends). That’s fairly close to the broader market return. Most would be happy with a gain, and it helps that the year’s return is actually better than the average return over five years, which was 10%. Even if the share price growth slows down from here, there’s a good chance that this is business worth watching in the long term. 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. To that end, you should learn about the 3 warning signs we’ve spotted with CVR Energy (including 1 which makes us a bit uncomfortable) .

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 American 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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