Imagine Owning Anheuser-Busch InBev (EBR:ABI) And Wondering If The 22% Share Price Slide Is Justified

While it may not be enough for some shareholders, we think it is good to see the Anheuser-Busch InBev SA/NV (EBR:ABI) share price up 19% in a single quarter. But that doesn’t change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 22% in the last three years, significantly under-performing the market.

View our latest analysis for Anheuser-Busch InBev

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Although the share price is down over three years, Anheuser-Busch InBev actually managed to grow EPS by 16% 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). Alternatively, growth expectations may have been unreasonable in the past. It’s worth taking a look at other metrics, because the EPS growth doesn’t seem to match with the falling share price.

We note that, in three years, revenue has actually grown at a 8.2% annual rate, so that doesn’t seem to be a reason to sell shares. It’s probably worth investigating Anheuser-Busch InBev further; while we may be missing something on this analysis, there might also be an opportunity.

ENXTBR:ABI Income Statement, August 30th 2019
ENXTBR:ABI Income Statement, August 30th 2019

Anheuser-Busch InBev is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Anheuser-Busch InBev stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Anheuser-Busch InBev, it has a TSR of -17% for the last 3 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It’s nice to see that Anheuser-Busch InBev shareholders have received a total shareholder return of 6.5% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 2.0% per year), it would seem that the stock’s performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Is Anheuser-Busch InBev cheap compared to other companies? These 3 valuation measures might help you decide.

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 BE 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.