Investors five-year losses continue as Tethys Oil (STO:TETY) dips a further 19% this week, earnings continue to decline

Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. Zooming in on an example, the Tethys Oil AB (publ) (STO:TETY) share price dropped 63% in the last half decade. That is extremely sub-optimal, to say the least. And it's not just long term holders hurting, because the stock is down 41% in the last year. Shareholders have had an even rougher run lately, with the share price down 31% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

After losing 19% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Tethys Oil

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Looking back five years, both Tethys Oil's share price and EPS declined; the latter at a rate of 9.8% per year. This reduction in EPS is less than the 18% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 2.92 further reflects this reticence.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Tethys Oil has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Tethys Oil'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. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Tethys Oil, it has a TSR of -53% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Tethys Oil shareholders are down 38% for the year (even including dividends), but the market itself is up 3.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild 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 business. 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 Tethys Oil is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

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 Swedish 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.