We believe investing is smart because history shows that stock markets go higher in the long term. But not every stock you buy will perform as well as the overall market. For example, the Rattler Midstream LP (NASDAQ:RTLR), share price is up over the last year, but its gain of 19% trails the market return. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over the last twelve months, Rattler Midstream actually shrank its EPS by 36%.
So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
Absent any improvement, we don't think a thirst for dividends is pushing up the Rattler Midstream's share price. Revenue actually dropped 18% over last year. It's fair to say we're a little surprised to see the share price up, and that makes us cautious.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).NasdaqGS:RTLR Earnings and Revenue Growth June 10th 2021
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Rattler Midstream's TSR for the last year was 31%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're happy to report that Rattler Midstream are up 31% over the year (even including dividends). While it's always nice to make a profit on the stock market, we do note that the TSR was no better than the broader market return of about 39%. The last three months haven't been so kind to Rattler Midstream, with the share price gaining just 5.9%. It's not uncommon to see a company's share price between updates to shareholders. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Rattler Midstream that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies 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 US 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.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
In This StoryRTLR
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