Investors more bullish on Pilgrim's Pride (NASDAQ:PPC) this week as stock ascends 3.5%, despite earnings trending downwards over past three years

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Pilgrim's Pride Corporation (NASDAQ:PPC), which is up 46%, over three years, soundly beating the market return of 15% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 12% in the last year.

The past week has proven to be lucrative for Pilgrim's Pride investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Pilgrim's Pride

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the three years of share price growth, Pilgrim's Pride actually saw its earnings per share (EPS) drop 12% per year.

So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.

It could be that the revenue growth of 16% per year is viewed as evidence that Pilgrim's Pride is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Pilgrim's Pride will earn in the future (free profit forecasts).

A Different Perspective

Pilgrim's Pride provided a TSR of 12% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 6% over half a decade It is possible that returns will improve along with the business fundamentals. 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 3 warning signs with Pilgrim's Pride (at least 1 which is a bit concerning) , 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 American 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.