Those Who Purchased Finsbury Food Group (LON:FIF) Shares Three Years Ago Have A 48% Loss To Show For It
For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Finsbury Food Group Plc (LON:FIF) shareholders have had that experience, with the share price dropping 48% in three years, versus a market decline of about 8.0%. And the ride hasn't got any smoother in recent times over the last year, with the price 22% lower in that time. The falls have accelerated recently, with the share price down 40% in the last three months. But this could be related to the weak market, which is down 20% in the same period.
Check out our latest analysis for Finsbury Food Group
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Although the share price is down over three years, Finsbury Food Group actually managed to grow EPS by 6.0% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. There doesn't seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Finsbury Food Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We've already covered Finsbury Food Group's share price action, but we should also mention its total shareholder return (TSR). 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. Dividends have been really beneficial for Finsbury Food Group shareholders, and that cash payout explains why its total shareholder loss of 43%, over the last 3 years, isn't as bad as the share price return.
A Different Perspective
While the broader market lost about 11% in the twelve months, Finsbury Food Group shareholders did even worse, losing 20%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4.3% over the last half decade. 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 Finsbury Food Group better, we need to consider many other factors. For example, we've discovered 2 warning signs for Finsbury Food Group that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.
