The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the DFM Foods Limited (NSE:DFMFOODS) share price slid 39% over twelve months. That's well below the market return of 13%. However, the longer term returns haven't been so bad, with the stock down 19% in the last three years. Shareholders have had an even rougher run lately, with the share price down 26% in the last 90 days.
After losing 12% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last year DFM Foods saw its earnings per share drop below zero. Some investors no doubt dumped the stock as a result. However, there may be an opportunity for investors if the company can recover.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on DFM Foods' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in DFM Foods had a tough year, with a total loss of 39% (including dividends), against a market gain of about 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% 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. It's always interesting to track share price performance over the longer term. But to understand DFM Foods better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for DFM Foods (of which 2 make us uncomfortable!) you should know about.
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.
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.