The five-year earnings decline is not helping Tate & Lyle's (LON:TATE share price, as stock falls another 9.3% in past week

For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Tate & Lyle plc (LON:TATE) shareholders for doubting their decision to hold, with the stock down 31% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 24%. The last week also saw the share price slip down another 9.3%. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

After losing 9.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

We've discovered 3 warning signs about Tate & Lyle. View them for free.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Looking back five years, both Tate & Lyle's share price and EPS declined; the latter at a rate of 29% per year. This fall in the EPS is worse than the 7% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve. The high P/E ratio of 49.94 suggests that shareholders believe earnings will grow in the years ahead.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Tate & Lyle's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Tate & Lyle's TSR for the last 5 years was -5.1%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Tate & Lyle had a tough year, with a total loss of 22% (including dividends), against a market gain of about 6.4%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.0% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Tate & Lyle is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...

Tate & Lyle is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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