Statistically speaking, long term investing is a profitable endeavour. But that doesn’t mean long term investors can avoid big losses. To wit, the Awilco Drilling PLC (OB:AWDR) share price managed to fall 85% over five long years. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 50% over the last twelve months. The falls have accelerated recently, with the share price down 23% in the last three months.
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.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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.
In the last half decade Awilco Drilling saw its share price fall as its EPS declined below zero. Since the company has fallen to a loss making position, it’s hard to compare the change in EPS with the share price change. However, we can say we’d expect to see a falling share price in this scenario.
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Dividend Lost
The value of past dividends are accounted for in the total shareholder return (TSR), but not in the share price return mentioned above. In some ways, TSR is a better measure of how well an investment has performed. Awilco Drilling’s TSR over the last 5 years is -60%; better than its share price return. Even though the company isn’t paying dividends at the moment, it has done in the past.
A Different Perspective
While the broader market lost about 9.6% in the twelve months, Awilco Drilling shareholders did even worse, losing 50%. 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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 17% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.