Simply Good Foods (NASDAQ:SMPL) shareholders have earned a 29% CAGR over the last five years

By
Simply Wall St
Published
November 27, 2021
NasdaqCM:SMPL
Source: Shutterstock

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. For example, the The Simply Good Foods Company (NASDAQ:SMPL) share price has soared 253% in the last half decade. Most would be very happy with that. It's down 2.8% in the last seven days.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Simply Good Foods

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 five years of share price growth, Simply Good Foods moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NasdaqCM:SMPL Earnings Per Share Growth November 28th 2021

Dive deeper into Simply Good Foods' key metrics by checking this interactive graph of Simply Good Foods's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Simply Good Foods has rewarded shareholders with a total shareholder return of 70% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 29% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Simply Good Foods that you should be aware of before investing here.

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 US exchanges.

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