Those Who Purchased CNOOC (HKG:883) Shares A Year Ago Have A 21% Loss To Show For It
It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by CNOOC Limited (HKG:883) shareholders over the last year, as the share price declined 21%. That's well bellow the market return of 4.1%. The silver lining (for longer term investors) is that the stock is still 13% higher than it was three years ago. It's up 3.5% in the last seven days.
Check out our latest analysis for CNOOC
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.
Even though the CNOOC share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.
It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.
We don't see any weakness in the CNOOC's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Of course, it could simply be that it simply fell short of the market consensus expectations.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
CNOOC is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling CNOOC stock, you should check out this free report showing analyst consensus estimates for future profits.
What About Dividends?
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of CNOOC, it has a TSR of -16% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market gained around 4.1% in the last year, CNOOC shareholders lost 16% (even including dividends) . Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 3.6% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Keeping this in mind, a solid next step might be to take a look at CNOOC's dividend track record. This free interactive graph is a great place to start.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
