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We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example the China Oil And Gas Group Limited (HKG:603) share price dropped 59% over five years. That's an unpleasant experience for long term holders. And we doubt long term believers are the only worried holders, since the stock price has declined 21% over the last twelve months. The last week also saw the share price slip down another 14%. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
View our latest analysis for China Oil And Gas Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
China Oil And Gas Group became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
The modest 0.8% dividend yield is unlikely to be guiding the market view of the stock. In contrast to the share price, revenue has actually increased by 4.1% a year in the five year 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 chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on China Oil And Gas Group's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 4.0% in the twelve months, China Oil And Gas Group shareholders did even worse, losing 20% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 16% per year over five years. We realise that Buffett 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 businesses. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.