Stock Analysis

What Type Of Returns Would Loblaw Companies'(TSE:L) Shareholders Have Earned If They Purchased Their SharesYear Ago?

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TSX:L
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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Loblaw Companies Limited (TSE:L) shareholders over the last year, as the share price declined 12%. That contrasts poorly with the market return of 8.2%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 3.5% in three years.

See our latest analysis for Loblaw Companies

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, Loblaw Companies had to report a 0.5% decline in EPS over the last year. The share price decline of 12% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
TSX:L Earnings Per Share Growth February 11th 2021

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Loblaw Companies' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Loblaw Companies had a tough year, with a total loss of 10% (including dividends), against a market gain of about 8.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 5%, 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 Loblaw Companies better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Loblaw Companies you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do 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 CA exchanges.

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About TSX:L

Loblaw Companies

Loblaw Companies Limited, a food and pharmacy company, engages in the grocery, pharmacy, health and beauty, apparel, general merchandise, financial services, and wireless mobile products and services businesses in Canada.

Solid track record with adequate balance sheet and pays a dividend.