Is ADF Foods's (NSE:ADFFOODS) Share Price Gain Of 252% Well Earned?
ADF Foods Limited (NSE:ADFFOODS) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 252% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Of course, that doesn't necessarily mean it's cheap now.
Check out our latest analysis for ADF Foods
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, ADF Foods managed to grow its earnings per share at 40% a year. This EPS growth is higher than the 29% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between ADF Foods's total shareholder return (TSR) and its share price return. 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. ADF Foods's TSR of 263% for the 5 years exceeded its share price return, because it has paid dividends.
A Different Perspective
While it's certainly disappointing to see that ADF Foods shares lost 5.4% throughout the year, that wasn't as bad as the market loss of 10%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 29% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
ADF Foods 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 IN 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.
