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Dolphin Drilling ASA (OB:DDASA) has rebounded strongly over the last week, with the share price soaring 205%. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Like a ship taking on water, the share price has sunk 99% in that time. The recent bounce might mean the long decline is over, but we are not confident. The million dollar question is whether the company can justify a long term recovery.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Because Dolphin Drilling is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last five years Dolphin Drilling saw its revenue shrink by 31% per year. That puts it in an unattractive cohort, to put it mildly. So it’s not altogether surprising to see the share price down 60% per year in the same time period. We don’t think this is a particularly promising picture. Of course, the poor performance could mean the market has been too severe selling down. That can happen.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
If you are thinking of buying or selling Dolphin Drilling stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market lost about 4.8% in the twelve months, Dolphin Drilling shareholders did even worse, losing 85%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 60% per year over five years. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
We will like Dolphin Drilling better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.