Yahoo Finance Did Changing Sentiment Drive Spectrum Brands Holdings's (NYSE:SPB) Share Price Down A Painful 72%?
It's not possible to invest over long periods without making some bad investments. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Spectrum Brands Holdings, Inc. (NYSE:SPB) investors who have held the stock for three years as it declined a whopping 72%. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 42% in a year. The falls have accelerated recently, with the share price down 48% in the last three months. Of course, this share price action may well have been influenced by the 23% decline in the broader market, throughout the period.
See our latest analysis for Spectrum Brands Holdings
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Spectrum Brands Holdings moved from a loss to profitability. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.
We note that the dividend has declined - a likely contributor to the share price drop. 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).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Spectrum Brands Holdings in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We've already covered Spectrum Brands Holdings's share price action, but we should also mention its total shareholder return (TSR). 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. Spectrum Brands Holdings's TSR of was a loss of 71% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
While the broader market lost about 12% in the twelve months, Spectrum Brands Holdings shareholders did even worse, losing 40% (even including dividends) . Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 14% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Spectrum Brands Holdings is showing 3 warning signs in our investment analysis , you should know about...
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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 editorial-team@simplywallst.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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