For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that’s been the case for longer term Odfjell SE (OB:ODF) shareholders, since the share price is down 14% in the last three years, falling well short of the market return of around 29%. Unfortunately the share price momentum is still quite negative, with prices down 8.3% in thirty days.
Odfjell wasn’t profitable in the last twelve months, 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, Odfjell grew revenue at 1.8% per year. Given it’s losing money in pursuit of growth, we are not really impressed with that. The stock dropped 5.0% during that time. Shareholders will probably be hoping growth picks up soon. But ultimately the key will be whether the company can become profitability.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between Odfjell’s total shareholder return (TSR) and its share price change, which we’ve covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Odfjell’s TSR of was a loss of 5.6% for the 3 years. That wasn’t as bad as its share price return, because it has paid dividends.
A Different Perspective
While the broader market gained around 5.4% in the last year, Odfjell shareholders lost 6.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 4.2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
We will like Odfjell better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.
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.
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