It might be of some concern to shareholders to see the Central Garden & Pet Company (NASDAQ:CENT) share price down 11% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. We think most investors would be happy with the 207% return, over that period. To some, the recent pullback wouldn’t be surprising after such a fast rise. Only time will tell if there is still too much optimism currently reflected in the share price.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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.
During five years of share price growth, Central Garden & Pet achieved compound earnings per share (EPS) growth of 37% per year. This EPS growth is higher than the 25% average annual increase in the share price. So it seems the market isn’t so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Central Garden & Pet’s earnings, revenue and cash flow.
A Different Perspective
Central Garden & Pet shareholders are down 7.7% for the year, but the market itself is up 13%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 25%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we’ve identified 2 warning signs for Central Garden & Pet that you should be aware of.
But note: Central Garden & Pet may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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. Thank you for reading.