Investors in Eneti (NYSE:NETI) have unfortunately lost 89% over the last five years




  • In Business
  • 2022-09-28 11:44:35Z
  • By Simply Wall St.
 

While not a mind-blowing move, it is good to see that the Eneti Inc. (NYSE:NETI) share price has gained 17% in the last three months. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Indeed, the share price is down a whopping 90% in that time. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The million dollar question is whether the company can justify a long term recovery. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

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.

See our latest analysis for Eneti

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 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.

During five years of share price growth, Eneti moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

We don't think that the 0.5% is big factor in the share price, since it's quite small, as dividends go. Arguably, the revenue drop of 3.5% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that Eneti has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Eneti

A Different Perspective

While the broader market lost about 21% in the twelve months, Eneti shareholders did even worse, losing 55% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 14% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Eneti better, we need to consider many other factors. Even so, be aware that Eneti is showing 2 warning signs in our investment analysis , you should know about...

But note: Eneti may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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