Big 5 Sporting Goods Corporation (NASDAQ:BGFV) shareholders will doubtless be very grateful to see the share price up 34% in the last quarter. But that doesn’t change the fact that the returns over the last three years have been stomach churning. In that time the share price has melted like a snowball in the desert, down 81%. So it’s about time shareholders saw some gains. The thing to think about is whether the business has really turned around.
While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
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.
Big 5 Sporting Goods became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it’s worth checking some other metrics too.
We note that the dividend has declined – a likely contributor to the share price drop. It doesn’t seem like the changes in revenue would have impacted the share price much, but a closer inspection of the data might reveal something.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Big 5 Sporting Goods stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Big 5 Sporting Goods, it has a TSR of -76% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Big 5 Sporting Goods shareholders are up 10% for the year (even including dividends) . But that return falls short of the market. But at least that’s still a gain! Over five years the TSR has been a reduction of 19% per year, over five years. So this might be a sign the business has turned its fortunes around. Keeping this in mind, a solid next step might be to take a look at Big 5 Sporting Goods’s dividend track record. This free interactive graph is a great place to start.
We will like Big 5 Sporting Goods better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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