Advertisement
Canada markets open in 1 hour 24 minutes
  • S&P/TSX

    22,107.08
    +194.56 (+0.89%)
     
  • S&P 500

    5,248.49
    +44.91 (+0.86%)
     
  • DOW

    39,760.08
    +477.75 (+1.22%)
     
  • CAD/USD

    0.7358
    -0.0014 (-0.19%)
     
  • CRUDE OIL

    82.40
    +1.05 (+1.29%)
     
  • Bitcoin CAD

    96,171.36
    +603.71 (+0.63%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • GOLD FUTURES

    2,231.20
    +18.50 (+0.84%)
     
  • RUSSELL 2000

    2,114.35
    +44.19 (+2.13%)
     
  • 10-Yr Bond

    4.1960
    0.0000 (0.00%)
     
  • NASDAQ futures

    18,491.25
    -12.50 (-0.07%)
     
  • VOLATILITY

    13.03
    +0.25 (+1.96%)
     
  • FTSE

    7,952.37
    +20.39 (+0.26%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     
  • CAD/EUR

    0.6818
    +0.0013 (+0.19%)
     

Those Who Purchased Phibro Animal Health (NASDAQ:PAHC) Shares A Year Ago Have A 33% Loss To Show For It

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Phibro Animal Health Corporation (NASDAQ:PAHC) share price slid 33% over twelve months. That falls noticeably short of the market return of around 18%. At least the damage isn't so bad if you look at the last three years, since the stock is down 19% in that time. Shareholders have had an even rougher run lately, with the share price down 29% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Check out our latest analysis for Phibro Animal Health

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

ADVERTISEMENT

Unfortunately Phibro Animal Health reported an EPS drop of 38% for the last year. We note that the 33% share price drop is very close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

NasdaqGM:PAHC Past and Future Earnings, November 19th 2019
NasdaqGM:PAHC Past and Future Earnings, November 19th 2019

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Phibro Animal Health's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Phibro Animal Health's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Phibro Animal Health's TSR of was a loss of 32% for the year. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Investors in Phibro Animal Health had a tough year, with a total loss of 32% (including dividends) , against a market gain of about 18%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4.3% over the last half decade. We realise that Buffett 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 businesses. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Phibro Animal Health 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 US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.