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Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. So we wouldn't blame long term Crown Crafts, Inc. (NASDAQ:CRWS) shareholders for doubting their decision to hold, with the stock down 41% over a half decade. The falls have accelerated recently, with the share price down 25% in the last three months. Of course, this share price action may well have been influenced by the 16% decline in the broader market, throughout the period.
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.
While the share price declined over five years, Crown Crafts actually managed to increase EPS by an average of 2.2% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.
The steady dividend doesn't really explain why the share price is down. It could be that the revenue decline of 3.6% per year is viewed as evidence that Crown Crafts is shrinking. With dividends up, but revenue down, some investors might be concluding that the company is no longer growing.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that Crown Crafts has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Crown Crafts in this interactive graph of future profit estimates.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Crown Crafts's TSR for the last 5 years was -16%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Crown Crafts shareholders have received a total shareholder return of 7.5% over one year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 3.4% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For instance, we've identified 4 warning signs for Crown Crafts (1 can't be ignored) that you should be aware of.
Of course Crown Crafts may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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 firstname.lastname@example.org. 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.
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. Thank you for reading.