Lerøy Seafood Group (OB:LSG) shareholders have endured a 27% loss from investing in the stock three years ago

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. 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 Lerøy Seafood Group ASA (OB:LSG) shareholders have had that experience, with the share price dropping 37% in three years, versus a market decline of about 17%. Unfortunately the share price momentum is still quite negative, with prices down 8.2% in thirty days. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

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 Lerøy Seafood Group

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 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.

During the unfortunate three years of share price decline, Lerøy Seafood Group actually saw its earnings per share (EPS) improve by 0.5% 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 pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. Looking to other metrics might better explain the share price change.

It's quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. In contrast it does not seem particularly likely that the revenue levels are a concern for investors.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Lerøy Seafood Group has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Lerøy Seafood Group in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Lerøy Seafood Group, it has a TSR of -27% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Lerøy Seafood Group shareholders gained a total return of 11% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Lerøy Seafood Group better, we need to consider many other factors. Even so, be aware that Lerøy Seafood Group is showing 1 warning sign in our investment analysis , you should know about...

But note: Lerøy Seafood Group 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 Norwegian 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.