The LT Foods (NSE:DAAWAT) Share Price Is Down 69% So Some Shareholders Are Wishing They Sold

Investing in stocks inevitably means buying into some companies that perform poorly. But long term LT Foods Limited (NSE:DAAWAT) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 69% share price collapse, in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 38% lower in that time. The falls have accelerated recently, with the share price down 25% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 23% in the same timeframe.

View our latest analysis for LT Foods

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 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).

During the unfortunate three years of share price decline, LT Foods actually saw its earnings per share (EPS) improve by 12% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that, in three years, revenue has actually grown at a 8.7% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating LT Foods further; while we may be missing something on this analysis, there might also be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that LT Foods has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling LT Foods stock, you should check out this free report showing analyst profit forecasts.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between LT Foods's 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. Its history of dividend payouts mean that LT Foods's TSR, which was a 68% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 18% in the twelve months, LT Foods shareholders did even worse, losing 37% (even including dividends) . However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 10% 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 for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with LT Foods (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

For those who like to find winning investments 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 IN exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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