For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Ocean Wilsons Holdings Limited (LON:OCN), since the last five years saw the share price fall 23%. It’s down 24% in about a quarter.
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 the five years over which the share price declined, Ocean Wilsons Holdings’s earnings per share (EPS) dropped by 12% each year. The share price decline of 5.1% per year isn’t as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.
The image below shows how EPS has tracked over time.
Dive deeper into Ocean Wilsons Holdings’s key metrics by checking this interactive graph of Ocean Wilsons Holdings’s earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Ocean Wilsons Holdings’s TSR for the last 5 years was -2.6%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 8.0% in the last year, Ocean Wilsons Holdings shareholders lost 18% (even including dividends) . However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 0.5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Importantly, we haven’t analysed Ocean Wilsons Holdings’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.