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While it may not be enough for some shareholders, we think it is good to see the Oceaneering International, Inc. (NYSE:OII) share price up 20% in a single quarter. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Five years have seen the share price descend precipitously, down a full 72%. 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 markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Over five years Oceaneering International's earnings per share dropped significantly, falling to a loss, with the share price also lower. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Oceaneering International's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Dividend Lost
The value of past dividends are accounted for in the total shareholder return (TSR), but not in the share price return mentioned above. In some ways, TSR is a better measure of how well an investment has performed. Oceaneering International's TSR over the last 5 years is -70%; better than its share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.
A Different Perspective
Investors in Oceaneering International had a tough year, with a total loss of 22%, against a market gain of about 7.0%. 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 21% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Oceaneering International 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 US exchanges.
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.
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.