DNO (OB:DNO) ascends 8.7% this week, taking five-year gains to 113%

By
Simply Wall St
Published
April 14, 2022
OB:DNO
Source: Shutterstock

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term DNO ASA (OB:DNO) shareholders have enjoyed a 97% share price rise over the last half decade, well in excess of the market return of around 61% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 56% in the last year , including dividends .

The past week has proven to be lucrative for DNO investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for DNO

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.

During the five years of share price growth, DNO moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
OB:DNO Earnings Per Share Growth April 14th 2022

We know that DNO has improved its bottom line lately, but is it going to grow revenue? Check if analysts think DNO will grow revenue in the future.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, DNO's TSR for the last 5 years was 113%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that DNO has rewarded shareholders with a total shareholder return of 56% in the last twelve months. That's including the dividend. That's better than the annualised return of 16% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 example, we've discovered 2 warning signs for DNO that you should be aware of before investing here.

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 NO exchanges.

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