The past five years for Greencore Group (LON:GNC) investors has not been profitable

Generally speaking long term investing is the way to go. But no-one is immune from buying too high. To wit, the Greencore Group plc (LON:GNC) share price managed to fall 59% over five long years. That is extremely sub-optimal, to say the least. And it's not just long term holders hurting, because the stock is down 31% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 12% in thirty days.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Greencore Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

While the share price declined over five years, Greencore Group actually managed to increase EPS by an average of 22% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

Revenue is actually up 1.6% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Greencore Group

A Dividend Lost

The value of past dividends are accounted for in the total shareholder return (TSR), but not in the share price return mentioned above. By accounting for the value of dividends paid, the TSR can be seen as a more complete measure of the value a company brings to its shareholders. Over the last 5 years, Greencore Group generated a TSR of -57%, which is, of course, better than the share price return. Even though the company isn't paying dividends at the moment, it has done in the past.

A Different Perspective

While the broader market lost about 0.4% in the twelve months, Greencore Group shareholders did even worse, losing 31%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. 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. It's always interesting to track share price performance over the longer term. But to understand Greencore Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Greencore Group you should be aware of.

Greencore Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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