719% earnings growth over 1 year has not materialized into gains for My Food Bag Group (NZSE:MFB) shareholders over that period

Investing in stocks comes with the risk that the share price will fall. Anyone who held My Food Bag Group Limited (NZSE:MFB) over the last year knows what a loser feels like. The share price is down a hefty 60% in that time. My Food Bag Group may have better days ahead, of course; we've only looked at a one year period. Shareholders have had an even rougher run lately, with the share price down 33% in the last 90 days.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Our analysis indicates that MFB is potentially undervalued!

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

My Food Bag Group stole the show with its EPS rocketing, in the last year. The rate of growth may not be sustainable, but it is still really positive. As a result, we're surprised to see the weak share price. So it's worth taking a look at some other metrics.

My Food Bag Group's dividend seems healthy to us, so we doubt that the yield is a concern for the market. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

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

It is of course excellent to see how My Food Bag Group has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of My Food Bag Group, it has a TSR of -56% for the last 1 year. 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

We doubt My Food Bag Group shareholders are happy with the loss of 56% over twelve months (even including dividends). That falls short of the market, which lost 12%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 33%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand My Food Bag Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with My Food Bag Group , and understanding them should be part of your investment process.

But note: My Food Bag 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 NZ 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.