Should Bega Cheese (ASX:BGA) Be Disappointed With Their 48% Profit?

The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. For example, the Bega Cheese Limited (ASX:BGA) share price is up 48% in the last year, clearly besting the market return of around 1.1% (not including dividends). That's a solid performance by our standards! Unfortunately the longer term returns are not so good, with the stock falling 31% in the last three years.

Check out our latest analysis for Bega Cheese

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 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.

During the last year Bega Cheese grew its earnings per share (EPS) by 353%. This EPS growth is significantly higher than the 48% increase in the share price. So it seems like the market has cooled on Bega Cheese, despite the growth. Interesting. Of course, with a P/E ratio of 54.28, the market remains optimistic.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Bega Cheese has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Bega Cheese, it has a TSR of 53% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Bega Cheese shareholders have received a total shareholder return of 53% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 1.5%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Bega Cheese better, we need to consider many other factors. For instance, we've identified 1 warning sign for Bega Cheese that you should be aware of.

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 AU 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.
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