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It might be of some concern to shareholders to see the NOV Inc. (NYSE:NOV) share price down 11% in the last month. But the silver lining is the stock is up over five years. However we are not very impressed because the share price is only up 40%, less than the market return of 160%. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 23% drop, in the last year.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
View our latest analysis for NOV
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During the last half decade, NOV became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how NOV has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of NOV, it has a TSR of 47% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 11% in the last year, NOV shareholders lost 21% (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 8% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand NOV better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for NOV you should be aware of.