As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Public Joint Stock Company Saratov Oil Refinery (MCX:KRKN) shareholders have had that experience, with the share price dropping 29% in three years, versus a market return of about 59%.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Although the share price is down over three years, Saratov Oil Refinery actually managed to grow EPS by 16% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed. 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.
We note that, in three years, revenue has actually grown at a 6.6% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Saratov Oil Refinery further; while we may be missing something on this analysis, there might also be an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Take a more thorough look at Saratov Oil Refinery's financial health with this free report on its balance sheet.
A Different Perspective
Investors in Saratov Oil Refinery had a tough year, with a total loss of 16%, against a market gain of about 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3.2% over the last half decade. 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
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 RU 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.