Volatility 101: Should Odyssey Marine Exploration (NASDAQ:OMEX) Shares Have Dropped 45%?

While it may not be enough for some shareholders, we think it is good to see the Odyssey Marine Exploration, Inc. (NASDAQ:OMEX) share price up 21% in a single quarter. But over the last half decade, the stock has not performed well. After all, the share price is down 45% in that time, significantly under-performing the market.

See our latest analysis for Odyssey Marine Exploration

Odyssey Marine Exploration isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. 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.

Over half a decade Odyssey Marine Exploration reduced its trailing twelve month revenue by 21% for each year. That’s definitely a weaker result than most pre-profit companies report. On the face of it we’d posit the share price fall of 11% compound, over five years is well justified by the fundamental deterioration. We doubt many shareholders are delighted with this share price performance. Risk averse investors probably wouldn’t like this one much.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NasdaqCM:OMEX Income Statement, February 25th 2020
NasdaqCM:OMEX Income Statement, February 25th 2020

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Odyssey Marine Exploration’s earnings, revenue and cash flow.

A Different Perspective

Investors in Odyssey Marine Exploration had a tough year, with a total loss of 43%, against a market gain of about 16%. 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 11% 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 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. Be aware that Odyssey Marine Exploration is showing 5 warning signs in our investment analysis , and 1 of those is concerning…

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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