We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. To wit, the RPC, Inc. (NYSE:RES) share price managed to fall 70% over five long years. That's not a lot of fun for true believers. Unfortunately the share price momentum is still quite negative, with prices down 13% in thirty days. We do note, however, that the broader market is down 9.6% in that period, and this may have weighed on the share price.
On a more encouraging note the company has added US$119m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
Though if you're not interested in researching what drove RES's performance, we have a free list of interesting investing ideas to potentially inspire your next investment!
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, RPC moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
The modest 1.2% dividend yield is unlikely to be guiding the market view of the stock. Arguably, the revenue drop of 17% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think RPC will earn in the future (free profit forecasts).
A Different Perspective
It's good to see that RPC has rewarded shareholders with a total shareholder return of 33% in the last twelve months. Of course, that includes the dividend. That certainly beats the loss of about 11% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. Take risks, for example - RPC has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
If you are like me, then you will 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.
What are the risks and opportunities for RPC?
Trading at 71.1% below our estimate of its fair value
Earnings are forecast to grow 26.76% per year
Became profitable this year
High level of non-cash earnings
Significant insider selling over the past 3 months
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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.
RPC, Inc., through its subsidiaries, provides a range of oilfield services and equipment for the oil and gas companies involved in the exploration, production, and development of oil and gas properties.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
|Analysis Area||Score (0-6)|
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet and undervalued.