Fresh Del Monte Produce (NYSE:FDP) investors are sitting on a loss of 54% if they invested five years ago
Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example the Fresh Del Monte Produce Inc. (NYSE:FDP) share price dropped 56% over five years. That's not a lot of fun for true believers. Furthermore, it's down 12% in about a quarter. That's not much fun for holders.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
View our latest analysis for Fresh Del Monte Produce
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. 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).
Looking back five years, both Fresh Del Monte Produce's share price and EPS declined; the latter at a rate of 6.5% per year. This reduction in EPS is less than the 15% annual reduction in the share price. This implies that the market was previously too optimistic about the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Fresh Del Monte Produce has grown profits over the years, but the future is more important for shareholders. This free interactive report on Fresh Del Monte Produce's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Fresh Del Monte Produce the TSR over the last 5 years was -54%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Fresh Del Monte Produce shareholders are up 11% for the year (even including dividends). But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. It could well be that the business is stabilizing. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Fresh Del Monte Produce (at least 1 which is potentially serious) , and understanding them should be part of your investment process.
Of course Fresh Del Monte Produce 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.
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.
