The shares of Diana Shipping (NYSE:DSX) were up an astounding 78% in 2013, compared with a 26% return for the S&P 500. So just what has caused shares to rally?

When looking at a company's stock price performance over a given period, it's valuable to break it down into two categories -- operating performance, and the stock market's expectations.

After a quick look at Diana Shipping's operating performance, it's readily apparent that the company's operating performance wasn't the primary cause behind the share rally. That leaves one reason -- the stock market's expectations.  

The market's expectations, as judged by Diana Shipping's price-to-sales multiple, have risen by an astounding 141% over the year and is the primary culprit behind the rally. In the following video, Motley Fool analyst Blake Bos explains the two factors driving shares higher, and how investors should view investing in Diana Shipping going forward.


Blake Bos and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.