Those who invested in Organon (NYSE:OGN) a year ago are up 37%
The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Organon & Co. (NYSE:OGN) share price is 32% higher than it was a year ago, much better than the market decline of around 12% (not including dividends) in the same period. That's a solid performance by our standards! We'll need to follow Organon for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Organon
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 the last twelve months, Organon actually shrank its EPS by 32%.
So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
Revenue was pretty flat year on year, but maybe a closer look at the data can explain the market optimism.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Organon stock, you should check out this free report showing analyst profit forecasts.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Organon the TSR over the last 1 year was 37%, 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
Organon boasts a total shareholder return of 37% for the last year (that includes the dividends) . The more recent returns haven't been as impressive as the longer term returns, coming in at just 4.5%. Having said that, we doubt shareholders would be concerned. It seems the market is simply waiting on more information, because if the business delivers so will the share price (eventually). 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 5 warning signs with Organon (at least 3 which are concerning) , and understanding them should be part of your investment process.
Organon 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.
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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.
