Yahoo Finance Introducing Patterson-UTI Energy (NASDAQ:PTEN), The Stock That Slid 60% In The Last Five Years
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Patterson-UTI Energy, Inc. (NASDAQ:PTEN) share price dropped 60% in the last half decade. That's an unpleasant experience for long term holders. We also note that the stock has performed poorly over the last year, with the share price down 43%. On top of that, the share price has dropped a further 15% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
See our latest analysis for Patterson-UTI Energy
Patterson-UTI Energy isn't a profitable company, so 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last half decade, Patterson-UTI Energy saw its revenue increase by 0.5% per year. That's far from impressive given all the money it is losing. It's likely this weak growth has contributed to an annualised return of 17% for the last five years. We'd want to see proof that future revenue growth is likely to be significantly stronger before getting too interested in Patterson-UTI Energy. However, it's possible too many in the market will ignore it, and there may be an opportunity if it starts to recover down the track.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Patterson-UTI Energy will earn in the future (free profit forecasts).
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Patterson-UTI Energy's TSR for the last 5 years was -57%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market gained around 6.3% in the last year, Patterson-UTI Energy shareholders lost 42% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 16% per year over five years. We realise that Buffett 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 businesses. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Patterson-UTI Energy is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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. Thank you for reading.
