Big River Industries' (ASX:BRI) Shareholders Are Down 29% On Their Shares

Big River Industries Limited (ASX:BRI) shareholders should be happy to see the share price up 12% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 29% in the last three years, significantly under-performing the market.

See our latest analysis for Big River Industries

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 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.

Big River Industries saw its EPS decline at a compound rate of 20% per year, over the last three years. This fall in the EPS is worse than the 11% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Big River Industries the TSR over the last 3 years was -22%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Over the last year, Big River Industries shareholders took a loss of 0.6%, including dividends. In contrast the market gained about 2.7%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Unfortunately, the longer term story isn't pretty, with investment losses running at 7% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Big River Industries , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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