Domino's Pizza Enterprises (ASX:DMP) stock falls 3.0% in past week as three-year earnings and shareholder returns continue downward trend

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Domino's Pizza Enterprises Limited (ASX:DMP) have had an unfortunate run in the last three years. Sadly for them, the share price is down 60% in that time. The falls have accelerated recently, with the share price down 25% in the last three months.

If the past week is anything to go by, investor sentiment for Domino's Pizza Enterprises isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Domino's Pizza Enterprises

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Domino's Pizza Enterprises saw its EPS decline at a compound rate of 32% per year, over the last three years. This fall in the EPS is worse than the 26% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 69.09.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Domino's Pizza Enterprises' earnings, revenue and cash flow.

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. We note that for Domino's Pizza Enterprises the TSR over the last 3 years was -57%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 13% in the last year, Domino's Pizza Enterprises shareholders lost 16% (even including dividends). 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 1.6%, 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. It's always interesting to track share price performance over the longer term. But to understand Domino's Pizza Enterprises better, we need to consider many other factors. To that end, you should be aware of the 4 warning signs we've spotted with Domino's Pizza Enterprises .

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 Australian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.