Yahoo Finance The past five years for Fevertree Drinks (LON:FEVR) investors has not been profitable
Fevertree Drinks PLC (LON:FEVR) shareholders should be happy to see the share price up 11% in the last quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. In that time the share price has delivered a rude shock to holders, who find themselves down 56% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. We'd err towards caution given the long term under-performance.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
View our latest analysis for Fevertree Drinks
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Looking back five years, both Fevertree Drinks' share price and EPS declined; the latter at a rate of 24% per year. This fall in the EPS is worse than the 15% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline. With a P/E ratio of 89.43, it's fair to say the market sees a brighter future for the business.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Fevertree Drinks' TSR for the last 5 years was -52%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Investors in Fevertree Drinks had a tough year, with a total loss of 17% (including dividends), against a market gain of about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Fevertree Drinks is showing 2 warning signs in our investment analysis , you should know about...
Fevertree Drinks is not the only stock that insiders are buying. For those who like to find lesser know companies 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 British 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.