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Imagine Owning Tiffany (NYSE:TIF) And Wondering If The 34% Share Price Slide Is Justified

Simply Wall St

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Tiffany & Co. (NYSE:TIF) share price slid 34% over twelve months. That falls noticeably short of the market return of around 2.2%. Longer term investors have fared much better, since the share price is up 16% in three years. But it's up 5.9% in the last week.

See our latest analysis for Tiffany

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the unfortunate twelve months during which the Tiffany share price fell, it actually saw its earnings per share (EPS) improve by 38%. Of course, the situation might betray previous over-optimism about growth. It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.

Revenue was pretty flat on last year, which isn't too bad. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

NYSE:TIF Income Statement, August 23rd 2019

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Tiffany's total shareholder return (TSR) and its share price return. 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. Dividends have been really beneficial for Tiffany shareholders, and that cash payout explains why its total shareholder loss of 33%, over the last year, isn't as bad as the share price return.

A Different Perspective

Investors in Tiffany had a tough year, with a total loss of 33% (including dividends), against a market gain of about 2.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.4% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Tiffany 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.

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.

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. Thank you for reading.