The past five years for Saipem (BIT:SPM) investors has not been profitable

While it may not be enough for some shareholders, we think it is good to see the Saipem SpA (BIT:SPM) share price up 19% in a single quarter. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. In fact, the share price has tumbled down a mountain to land 99% lower after that period. So we don't gain too much confidence from the recent recovery. The million dollar question is whether the company can justify a long term recovery. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

View our latest analysis for Saipem

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Saipem moved from a loss to profitability. 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.

In contrast to the share price, revenue has actually increased by 11% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Saipem is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Saipem will earn in the future (free analyst consensus estimates)

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Saipem's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Saipem's TSR, which was a 76% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

We're pleased to report that Saipem shareholders have received a total shareholder return of 69% over one year. There's no doubt those recent returns are much better than the TSR loss of 12% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before deciding if you like the current share price, check how Saipem scores on these 3 valuation metrics.

Of course Saipem may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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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.