Transocean (NYSE:RIG shareholders incur further losses as stock declines 11% this week, taking five-year losses to 79%

By
Simply Wall St
Published
January 24, 2022
NYSE:RIG
Source: Shutterstock

Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Transocean Ltd. (NYSE:RIG) for five years would be nursing their metaphorical wounds since the share price dropped 79% in that time. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days.

If the past week is anything to go by, investor sentiment for Transocean isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Transocean

Transocean wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last five years Transocean saw its revenue shrink by 3.9% per year. While far from catastrophic that is not good. The share price fall of 12% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. Fear of becoming a 'bagholder' may be keeping people away from this stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NYSE:RIG Earnings and Revenue Growth January 24th 2022

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

We're pleased to report that Transocean shareholders have received a total shareholder return of 14% over one year. Notably the five-year annualised TSR loss of 12% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Transocean you should know about.

Transocean is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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