Goodrich Petroleum (NYSEMKT:GDP) Share Prices Have Dropped 45% In The Last Three Years
For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Goodrich Petroleum Corporation (NYSEMKT:GDP) shareholders, since the share price is down 45% in the last three years, falling well short of the market return of around 38%. The more recent news is of little comfort, with the share price down 38% in a year. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.
See our latest analysis for Goodrich Petroleum
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
Although the share price is down over three years, Goodrich Petroleum actually managed to grow EPS by 6.5% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
Revenue is actually up 45% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Goodrich Petroleum more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Goodrich Petroleum has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Goodrich Petroleum stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Goodrich Petroleum shareholders are down 38% for the year, but the broader market is up 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 13% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. Even so, be aware that Goodrich Petroleum is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
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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