Golden Ocean Group’s (NASDAQ:GOGL) annual shareholder returns lag behind the company’s 44% three-year earnings growth

Not the best quarter since Golden Ocean Group Limited (NASDAQ: GOGL) shareholders, as the share price fell 25% during this period. But over three years, the returns would have left most investors smiling. For three years, the share price has risen by 40%: better than the market.

In light of the stock’s 3.6% drop over the past week, we want to look at the longer-term story and see if fundamentals have been driving the company’s positive three-year performance. .

Our analysis indicates that GOGL is potentially undervalued!

In his test The Graham-and-Doddsville super-investors Warren Buffett has described how stock prices don’t always rationally reflect a company’s value. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.

In three years of share price growth, Golden Ocean Group has achieved compound earnings per share growth of 200% per year. This EPS growth is greater than the average annual share price increase of 12%. So it seems investors have become more cautious about the company over time. We think the low P/E ratio of 2.43 also reflects the negative sentiment around the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see more details).

NasdaqGS: GOGL Earnings Per Share Growth as of November 1, 2022

We know that Golden Ocean Group has improved its results over the past three years, but what does the future hold? It might be interesting to take a look at our free report on the evolution of its financial situation over time.

What about dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. We note that for Golden Ocean Group the TSR over the last 3 years was 102%, which is better than the share price return mentioned above. And there’s no price guessing that dividend payouts largely explain the divergence!

A different perspective

We are pleased to report that Golden Ocean Group shareholders received a 17% year-on-year total shareholder return. Of course, this includes the dividend. As the one-year TSR is better than the five-year TSR (the latter standing at 10% per year), it seems that the stock’s performance has improved lately. Someone with an optimistic outlook might see the recent improvement in TSR as indicating that the company itself is improving over time. It is always interesting to follow the evolution of the share price over the long term. But to better understand Golden Ocean Group, we need to consider many other factors. To do this, you need to find out about the 3 warning signs we spotted with Golden Ocean Group (including 1 that is significant) .

Sure, you might find a fantastic investment by looking elsewhere. So take a look at this free list of companies that we believe will increase their profits.

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.

Valuation is complex, but we help make it simple.

Find out if Golden Ocean Group is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

See the free analysis

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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