In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn’t blame long term Pilgrim’s Pride Corporation (NASDAQ:PPC) shareholders for doubting their decision to hold, with the stock down 19% over a half decade. In the last ninety days we’ve seen the share price slide 30%. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Looking back five years, both Pilgrim’s Pride’s share price and EPS declined; the latter at a rate of 7.8% per year. The share price decline of 4.2% per year isn’t as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Pilgrim’s Pride has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Pilgrim’s Pride will grow revenue in the future.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Pilgrim’s Pride’s total shareholder return (TSR) and its share price return. 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. Dividends have been really beneficial for Pilgrim’s Pride shareholders, and that cash payout explains why its total shareholder loss of 9.7%, over the last 5 years, isn’t as bad as the share price return.
A Different Perspective
Pilgrim’s Pride shareholders have received returns of 12% over twelve months, which isn’t far from the general market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 2.0% over the last five years. We’re pretty skeptical of turnaround stories, but it’s good to see the recent share price recovery. 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 risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Pilgrim’s Pride you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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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