Odfjell Drilling (OB:ODL) stock performs better than its underlying earnings growth over last three years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. To wit, the Odfjell Drilling Ltd. (OB:ODL) share price has flown 105% in the last three years. How nice for those who held the stock! Better yet, the share price has risen 7.0% in the last week.

Since the stock has added kr616m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Odfjell Drilling

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...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Odfjell Drilling was able to grow its EPS at 81% per year over three years, sending the share price higher. The average annual share price increase of 27% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.96.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Odfjell Drilling has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Odfjell Drilling's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Odfjell Drilling the TSR over the last 3 years was 145%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Odfjell Drilling has rewarded shareholders with a total shareholder return of 51% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Odfjell Drilling is showing 3 warning signs in our investment analysis , and 1 of those is significant...

We will like Odfjell 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 Norwegian 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.