Yahoo Finanza The past five years for OC Oerlikon (VTX:OERL) investors has not been profitable
Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. To wit, the OC Oerlikon Corporation AG (VTX:OERL) share price managed to fall 71% over five long years. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 39%. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for OC Oerlikon
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...' 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.
During the unfortunate half decade during which the share price slipped, OC Oerlikon actually saw its earnings per share (EPS) improve by 0.2% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.
We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. It's not immediately clear to us why the stock price is down but further research might provide some answers.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at OC Oerlikon's financial health with this free report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, OC Oerlikon's TSR for the last 5 years was -59%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
OC Oerlikon shareholders are down 35% for the year (even including dividends), but the market itself is up 2.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 OC Oerlikon is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...
Of course OC Oerlikon may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Swiss exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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