Scorpio Tankers Inc. (NYSE:STNG) shareholders should be happy to see the share price up 14% in the last month. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Indeed, the share price is down a whopping 83% in that time. It’s true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The important question is if the business itself justifies a higher share price in the long term.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Scorpio Tankers isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, Scorpio Tankers saw its revenue increase by 11% per year. That’s a fairly respectable growth rate. So the stock price fall of 30% per year seems pretty steep. The truth is that the growth might be below expectations, and investors are probably worried about the continual losses.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
Scorpio Tankers is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Scorpio Tankers stock, you should check out this free report showing analyst consensus estimates for future profits.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Scorpio Tankers the TSR over the last 5 years was -79%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 1.4% in the last year, Scorpio Tankers shareholders lost 18% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 27% doled out over the last five years. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.