The past three years for Premium Brands Holdings (TSE:PBH) investors has not been profitable

Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Premium Brands Holdings Corporation (TSE:PBH) shareholders have had that experience, with the share price dropping 24% in three years, versus a market return of about 20%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Premium Brands Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Premium Brands Holdings saw its EPS decline at a compound rate of 7.0% per year, over the last three years. This change in EPS is reasonably close to the 9% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Premium Brands Holdings' 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Premium Brands Holdings the TSR over the last 3 years was -16%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Premium Brands Holdings had a tough year, with a total loss of 9.5% (including dividends), against a market gain of about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Premium Brands Holdings you should know about.

Premium Brands Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian 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.