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The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term TechnipFMC plc (NYSE:FTI) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 74% drop in the share price over that period. Even worse, it's down 22% in about a month, which isn't fun at all.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
During five years of share price growth, TechnipFMC moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.
With a rather small yield of just 1.7% we doubt that the stock's share price is based on its dividend. We think that the revenue decline over three years, at a rate of 3.6% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
TechnipFMC is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling TechnipFMC stock, you should check out this free report showing analyst consensus estimates for future profits.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, TechnipFMC's TSR for the last 3 years was -62%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the market return was 40% in the last year, TechnipFMC returned 37% to shareholders. Given the three-year TSR of 17% per year, shareholders probably aren't too concerned by the recent gain! It could well be that the business is getting back on track. 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. To that end, you should learn about the 5 warning signs we've spotted with TechnipFMC (including 2 which are potentially serious) .
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.
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.
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