Did Changing Sentiment Drive Cal-Maine Foods's (NASDAQ:CALM) Share Price Down By 11%?
Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Cal-Maine Foods, Inc. (NASDAQ:CALM) have tasted that bitter downside in the last year, as the share price dropped 11%. That falls noticeably short of the market return of around -8.1%. At least the damage isn't so bad if you look at the last three years, since the stock is down 0.6% in that time. And the share price decline continued over the last week, dropping some 7.5%.
Check out our latest analysis for Cal-Maine Foods
Because Cal-Maine Foods made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In just one year Cal-Maine Foods saw its revenue fall by 23%. That's not what investors generally want to see. The stock price has languished lately, falling 11% in a year. That seems pretty reasonable given the lack of both profits and revenue growth. It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Cal-Maine Foods stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Cal-Maine Foods's total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that Cal-Maine Foods's TSR, which was a 11% drop over the last year, was not as bad as the share price return.
A Different Perspective
While the broader market lost about 8.1% in the twelve months, Cal-Maine Foods shareholders did even worse, losing 11%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 0.5%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
We will like Cal-Maine Foods better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.
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.
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.
