Yahoo Finance Those Who Purchased New Zealand Refining (NZSE:NZR) Shares Five Years Ago Have A 65% Loss To Show For It
Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. To wit, the The New Zealand Refining Company Limited (NZSE:NZR) share price managed to fall 65% over five long years. We certainly feel for shareholders who bought near the top. And it's not just long term holders hurting, because the stock is down 57% in the last year. Furthermore, it's down 45% in about a quarter. That's not much fun for holders.
See our latest analysis for New Zealand Refining
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years over which the share price declined, New Zealand Refining's earnings per share (EPS) dropped by 16% each year. Notably, the share price has fallen at 19% per year, fairly close to the change in the EPS. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on New Zealand Refining's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between New Zealand Refining's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. New Zealand Refining's TSR of was a loss of 55% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Investors in New Zealand Refining had a tough year, with a total loss of 57%, against a market gain of about 3.5%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 15% per year over five years. 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 New Zealand Refining better, we need to consider many other factors. Even so, be aware that New Zealand Refining is showing 3 warning signs in our investment analysis , you should know about...
But note: New Zealand Refining 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 NZ exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
