U.S. markets closed
  • S&P 500

    3,298.46
    +51.87 (+1.60%)
     
  • Dow 30

    27,173.96
    +358.56 (+1.34%)
     
  • Nasdaq

    10,913.56
    +241.26 (+2.26%)
     
  • Russell 2000

    1,474.91
    +23.09 (+1.59%)
     
  • Crude Oil

    40.04
    -0.27 (-0.67%)
     
  • Gold

    1,864.30
    -12.60 (-0.67%)
     
  • Silver

    22.99
    -0.21 (-0.91%)
     
  • EUR/USD

    1.1637
    -0.0038 (-0.33%)
     
  • 10-Yr Bond

    0.6590
    -0.0070 (-1.05%)
     
  • GBP/USD

    1.2744
    -0.0007 (-0.06%)
     
  • USD/JPY

    105.5000
    +0.0980 (+0.09%)
     
  • BTC-USD

    10,695.39
    -39.97 (-0.37%)
     
  • CMC Crypto 200

    230.19
    +12.36 (+5.67%)
     
  • FTSE 100

    5,842.67
    +19.89 (+0.34%)
     
  • Nikkei 225

    23,204.62
    +116.82 (+0.51%)
     

Imagine Owning Blackmores (ASX:BKL) And Wondering If The 28% Share Price Slide Is Justified

Simply Wall St

Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Blackmores Limited (ASX:BKL) shareholders have had that experience, with the share price dropping 28% in three years, versus a market decline of about 5.3%.

Check out our latest analysis for Blackmores

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years that the share price fell, Blackmores's earnings per share (EPS) dropped by 23% each year. This fall in the EPS is worse than the 10% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

ASX:BKL Past and Future Earnings May 17th 2020
ASX:BKL Past and Future Earnings May 17th 2020

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Blackmores's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Blackmores's share price action, but we should also mention its total shareholder return (TSR). 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. Its history of dividend payouts mean that Blackmores's TSR, which was a 23% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 12% in the twelve months, Blackmores shareholders did even worse, losing 16%. 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. On the bright side, long term shareholders have made money, with a gain of 3.0% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Blackmores better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Blackmores , and understanding them should be part of your investment process.

Blackmores is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.