- Energy Services
CGG (EPA:CGG investor five-year losses grow to 55% as the stock sheds €149m this past week
CGG (EPA:CGG) shareholders should be happy to see the share price up 16% in the last quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. The share price has failed to impress anyone , down a sizable 55% during that time. So we're hesitant to put much weight behind the short term increase. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.
Since CGG has shed €149m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for CGG
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 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.
CGG became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
The revenue decline of 2.6% isn't too bad. But if the market expected durable top line growth, then that could explain the share price weakness.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that CGG has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling CGG stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
While the broader market gained around 10% in the last year, CGG shareholders lost 23%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild 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 business. 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 2 warning signs with CGG (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on French exchanges.
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Find out whether CGG is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
CGG provides data, products, services, and solutions in Earth science, data science, sensing, and monitoring in North America, the Central and South Americas, Europe, Africa, the Middle East, and the Asia Pacific.
Good value with reasonable growth potential.