For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers So we wouldn’t blame long term ORBIS AG (ETR:OBS) shareholders for doubting their decision to hold, with the stock down 26% over a half decade.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for ORBIS
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
During the unfortunate half decade during which the share price slipped, ORBIS actually saw its earnings per share (EPS) improve by 3.3% per year. So it doesn’t seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.
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.
The modest 1.7% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 14% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that ORBIS has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, ORBIS’ TSR for the last 5 years was -19%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
