Stock Analysis

Shareholders Of Oxford Metrics (LON:OMG) Must Be Happy With Their 130% Total Return

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AIM:OMG
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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Oxford Metrics plc (LON:OMG) stock is up an impressive 105% over the last five years. On top of that, the share price is up 22% in about a quarter. But this could be related to the strong market, which is up 13% in the last three months.

View our latest analysis for Oxford Metrics

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.

Oxford Metrics' earnings per share are down 20% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

The modest 2.0% dividend yield is unlikely to be propping up the share price. On the other hand, Oxford Metrics' revenue is growing nicely, at a compound rate of 6.4% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
AIM:OMG Earnings and Revenue Growth February 1st 2021

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 Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Oxford Metrics the TSR over the last 5 years was 130%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Oxford Metrics shareholders are down 18% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 5.6%. 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. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Oxford Metrics better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Oxford Metrics (including 1 which doesn't sit too well with us) .

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 GB exchanges.

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