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A Look At Oil Search's (ASX:OSH) Share Price Returns

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·3 min read
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Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Oil Search Limited (ASX:OSH) have had an unfortunate run in the last three years. Unfortunately, they have held through a 55% decline in the share price in that time.

See our latest analysis for Oil Search

Oil Search isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last three years, Oil Search's revenue dropped 3.2% per year. That's not what investors generally want to see. The share price decline of 16% compound, over three years, is understandable given the company doesn't have profits to boast of, and revenue is moving in the wrong direction. Of course, it's the future that will determine whether today's price is a good one. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
earnings-and-revenue-growth

Oil Search is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Oil Search in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Oil Search the TSR over the last 3 years was -52%, 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

Oil Search shareholders have received returns of 37% over twelve months (even including dividends), which isn't far from the general market return. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 7%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for Oil Search. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Oil Search , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.