Tenaris S.A. (BIT:TEN) shareholders should be happy to see the share price up 11% in the last month. But if you look at the last five years the returns have not been good. After all, the share price is down 23% in that time, significantly under-performing the market.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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, Tenaris moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
It could be that the revenue decline of 15% per year is viewed as evidence that Tenaris is shrinking. That could explain the weak share price.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Tenaris is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Tenaris will earn in the future (free analyst consensus estimates)
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 discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Tenaris the TSR over the last 5 years was -11%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Tenaris shareholders are down 14% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 4.9%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 2.4% per year over five years. 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. Keeping this in mind, a solid next step might be to take a look at Tenaris’s dividend track record. This free interactive graph is a great place to start.
Of course Tenaris may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT 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 email@example.com. 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.