For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Gan Shmuel Foods Ltd. (TLV:GSFI) shareholders, since the share price is down 42% in the last three years, falling well short of the market return of around 30%. The falls have accelerated recently, with the share price down 34% in the last three months.
See our latest analysis for Gan Shmuel Foods
While Gan Shmuel Foods made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over the last three years, Gan Shmuel Foods' revenue dropped 4.0% per year. That's not what investors generally want to see. The stock has disappointed holders over the last three years, falling 12%, annualized. That makes sense given the lack of either profits or revenue growth. However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Gan Shmuel Foods' total shareholder return (TSR) and its share price change, which we've covered above. 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. Gan Shmuel Foods' TSR of was a loss of 33% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Gan Shmuel Foods shareholders are down 20% for the year, but the market itself is up 1.1%. 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 1.1%, 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. 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. To that end, you should learn about the 5 warning signs we've spotted with Gan Shmuel Foods (including 1 which shouldn't be ignored) .
But note: Gan Shmuel Foods may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IL 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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About TASE:GSFI
Gan Shmuel Foods
Produces and sells citrus fruits for the beverage and food industry in Israel.
Outstanding track record with flawless balance sheet and pays a dividend.
