It's normal to be annoyed when stock you own has a declining share price. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. The Danone S.A. (EPA:BN) share price is down 12% in the last year. However, that's better than the market's overall decline of 13%. At least the damage isn't so bad if you look at the last three years, since the stock is down 7.0% in that time. The share price has dropped 16% in three months. Of course, this share price action may well have been influenced by the 23% decline in the broader market, throughout the period.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Unfortunately Danone reported an EPS drop of 19% for the last year. This fall in the EPS is significantly worse than the 12% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Danone's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Danone's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Danone shareholders, and that cash payout explains why its total shareholder loss of 12%, over the last year, isn't as bad as the share price return.
A Different Perspective
Danone shareholders are down 12% over twelve months (even including dividends) , which isn't far from the market return of -13%. The silver lining is that longer term investors would have made a total return of 2.0% per year over half a decade. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. It's always interesting to track share price performance over the longer term. But to understand Danone better, we need to consider many other factors. Take risks, for example - Danone has 2 warning signs we think you should be aware of.
But note: Danone may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR 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.
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