Introducing Ocean Yield (OB:OCY), The Stock That Dropped 30% In The Last Three Years
Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Ocean Yield ASA (OB:OCY) shareholders, since the share price is down 30% in the last three years, falling well short of the market return of around 32%. The more recent news is of little comfort, with the share price down 30% in a year. More recently, the share price has dropped a further 10% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
Check out our latest analysis for Ocean Yield
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Ocean Yield saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Extraordinary items contributed to this situation. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Ocean Yield's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 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. We note that for Ocean Yield the TSR over the last 3 years was -1.4%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market gained around 4.3% in the last year, Ocean Yield shareholders lost 20% (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. On the bright side, long term shareholders have made money, with a gain of 10% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Ocean Yield better, we need to consider many other factors. Take risks, for example - Ocean Yield has 3 warning signs (and 2 which are significant) we think you should know about.
Ocean Yield is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
