It's nice to see the Owens & Minor, Inc. (NYSE:OMI) share price up 14% in a week. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 79% in that time. Arguably, the recent bounce is to be expected after such a bad drop. Only time will tell if the company can sustain the turnaround.
Owens & Minor isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over three years, Owens & Minor grew revenue at 1.2% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. But the share price crash at 40% per year does seem a bit harsh! We generally don't try to 'catch the falling knife'. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Owens & Minor's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Owens & Minor the TSR over the last 3 years was -76%, 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
Owens & Minor shareholders gained a total return of 9.7% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 23% per year, over five years. So this might be a sign the business has turned its fortunes around. You could get a better understanding of Owens & Minor's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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 US exchanges.
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