The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Ocean Wilsons Holdings Limited (LON:OCN), since the last five years saw the share price fall 26%. Furthermore, it's down 14% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 5.7% in the same timeframe.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over five years Ocean Wilsons Holdings' earnings per share dropped significantly, falling to a loss, with the share price also lower. The recent extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But we would generally expect a lower price, given the situation.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
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. It might be well worthwhile taking a look at our free report on Ocean Wilsons Holdings' earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Ocean Wilsons Holdings the TSR over the last 5 years was -1.6%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's certainly disappointing to see that Ocean Wilsons Holdings shares lost 10% throughout the year, that wasn't as bad as the market loss of 12%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 0.3% over the last half decade. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Ocean Wilsons Holdings , and understanding them should be part of your investment process.
Ocean Wilsons Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.
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