Investors three-year returns in O-I Glass (NYSE:OI) have grown faster than the company's underlying earnings growth
You can receive the average market return by buying a low-cost index fund. But if you pick the right individual stocks, you could make more than that. To wit, O-I Glass, Inc. (NYSE:OI) shares are up 45% in three years, besting the market return. The bad news is that the share price seems to lack positive momentum recently, since it has dropped 4.7% in the last year.
Although O-I Glass has shed US$69m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Check out our latest analysis for O-I Glass
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
O-I Glass was able to grow its EPS at 49% per year over three years, sending the share price higher. This EPS growth is higher than the 13% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. We'd venture the lowish P/E ratio of 4.80 also reflects the negative sentiment around the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how O-I Glass has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at O-I Glass' financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered O-I Glass' share price action, but we should also mention its total shareholder return (TSR). 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 O-I Glass' TSR of 47% over the last 3 years is better than the share price return.
A Different Perspective
While it's certainly disappointing to see that O-I Glass shares lost 4.7% throughout the year, that wasn't as bad as the market loss of 13%. Of far more concern is the 7% p.a. loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. 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. Take risks, for example - O-I Glass has 2 warning signs we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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