Conagra Brands (NYSE:CAG) shareholders have earned a 14% CAGR over the last three years
Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. For example, the Conagra Brands, Inc. (NYSE:CAG) share price return of 36% over three years lags the market return in the same period. Looking at more recent returns, the stock is up 11% in a year.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Conagra Brands
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years of share price growth, Conagra Brands actually saw its earnings per share (EPS) drop 4.8% per year.
Based on these numbers, we think that the decline in earnings per share may not be a good representation of how the business has changed over the years. So other metrics may hold the key to understanding what is influencing investors.
It may well be that Conagra Brands revenue growth rate of 3.3% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Conagra Brands' TSR for the last 3 years was 50%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Conagra Brands has rewarded shareholders with a total shareholder return of 15% in the last twelve months. That's including the dividend. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Conagra Brands better, we need to consider many other factors. For instance, we've identified 5 warning signs for Conagra Brands (1 is a bit concerning) that you should be aware of.
Conagra Brands 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 American 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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