The nature of investing is that you win some, and you lose some. Unfortunately, shareholders of Orion Engineered Carbons S.A. (NYSE:OEC) have suffered share price declines over the last year. The share price has slid 60% in that time. However, the longer term returns haven't been so bad, with the stock down 24% in the last three years. Furthermore, it's down 28% in about a quarter. That's not much fun for holders.
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 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).
Unfortunately Orion Engineered Carbons reported an EPS drop of 23% for the last year. The share price decline of 60% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 9.75.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Orion Engineered Carbons's key metrics by checking this interactive graph of Orion Engineered Carbons's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Orion Engineered Carbons's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Orion Engineered Carbons's TSR, which was a 59% drop over the last year, was not as bad as the share price return.
A Different Perspective
Orion Engineered Carbons shareholders are down 59% for the year (even including dividends), but the market itself is up 1.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before forming an opinion on Orion Engineered Carbons you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
But note: Orion Engineered Carbons may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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 firstname.lastname@example.org. 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.