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Did Changing Sentiment Drive Sealed Air's (NYSE:SEE) Share Price Down By 42%?

Simply Wall St

Sealed Air Corporation (NYSE:SEE) shareholders should be happy to see the share price up 10% in the last week. But in truth the last year hasn't been good for the share price. In fact, the price has declined 42% in a year, falling short of the returns you could get by investing in an index fund.

View our latest analysis for Sealed Air

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Even though the Sealed Air share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.

It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.

Revenue was fairly steady year on year, which isn't usually such a bad thing. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NYSE:SEE Income Statement April 8th 2020

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Sealed Air in this interactive graph of future profit estimates.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Sealed Air's total shareholder return (TSR) and its share price change, which we've covered above. 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. Sealed Air's TSR of was a loss of 41% for the year. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 8.1% in the twelve months, Sealed Air shareholders did even worse, losing 41% (even including dividends) . However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8.1% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with Sealed Air (including 1 which is is a bit concerning) .

Sealed Air is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.

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