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The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Nabors Industries Ltd. (NYSE:NBR) have tasted that bitter downside in the last year, as the share price dropped 45%. That's well below the market return of 23%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 18% in three years. Even worse, it's down 15% in about a month, which isn't fun at all.
If the past week is anything to go by, investor sentiment for Nabors Industries isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Check out our latest analysis for Nabors Industries
Nabors Industries wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In just one year Nabors Industries saw its revenue fall by 2.4%. That's not what investors generally want to see. The stock price has languished lately, falling 45% in a year. What would you expect when revenue is falling, and it doesn't make a profit? It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Nabors Industries shareholders are down 45% for the year, but the market itself is up 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.