Omega Flex (NASDAQ:OFLX) shareholders have endured a 53% loss from investing in the stock three years ago
If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Omega Flex, Inc. (NASDAQ:OFLX) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 55% decline in the share price in that time. The more recent news is of little comfort, with the share price down 43% in a year.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Omega Flex
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).
Although the share price is down over three years, Omega Flex actually managed to grow EPS by 6.4% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The modest 1.9% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 3.5% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Omega Flex more closely, as sometimes stocks fall unfairly. This could present an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Omega Flex's earnings, revenue and cash flow.
A Different Perspective
Investors in Omega Flex had a tough year, with a total loss of 42% (including dividends), against a market gain of about 26%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.2% per year over five years. 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 Omega Flex you might want to consider these 3 valuation metrics.
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 American 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.
