It's understandable if you feel frustrated when a stock you own sees a lower share price. But often it is not a reflection of the fundamental business performance. The California Resources Corporation (NYSE:CRC) is down 11% over a year, but the total shareholder return is -9.2% once you include the dividend. And that total return actually beats the market decline of 23%. We wouldn't rush to judgement on California Resources because we don't have a long term history to look at. Unfortunately the last month hasn't been any better, with the share price down 28%.
Since California Resources has shed US$537m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
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.
Unfortunately California Resources reported an EPS drop of 79% for the last year. The share price fall of 11% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into California Resources' key metrics by checking this interactive graph of California Resources's earnings, revenue and cash flow.
A Different Perspective
Given that the broader market dropped 23% over the year, the fact that California Resources shareholders were down 9.2% isn't so bad. Things weren't so bad until the last three months, when the stock dropped 12%. The recent drop implies that investors are increasingly averse to the stock -- quite possibly due to a deterioration of the business. However, this could create an opportunity if the fundamentals remain strong. It's always interesting to track share price performance over the longer term. But to understand California Resources better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for California Resources you should be aware of, and 2 of them can't be ignored.
Of course California Resources may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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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