Stock Analysis

Oil and Natural Gas'(NSE:ONGC) Share Price Is Down 45% Over The Past Three Years.

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NSEI:ONGC
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Oil and Natural Gas Corporation Limited (NSE:ONGC) shareholders will doubtless be very grateful to see the share price up 37% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 45% in the last three years, falling well short of the market return.

View our latest analysis for Oil and Natural Gas

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 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.

During the three years that the share price fell, Oil and Natural Gas' earnings per share (EPS) dropped by 65% each year. In comparison the 18% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. This positive sentiment is also reflected in the generous P/E ratio of 145.95.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
NSEI:ONGC Earnings Per Share Growth February 22nd 2021

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Oil and Natural Gas' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Oil and Natural Gas the TSR over the last 3 years was -35%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Oil and Natural Gas shareholders are up 12% for the year (even including dividends). Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 1.7% per year, over five years. It could well be that the business is stabilizing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 4 warning signs for Oil and Natural Gas that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.

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