Introducing Bellamy's Australia (ASX:BAL), The Stock That Dropped 47% In The Last Year
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While not a mind-blowing move, it is good to see that the Bellamy's Australia Limited (ASX:BAL) share price has gained 25% in the last three months. But that is minimal compensation for the share price under-performance over the last year. In fact, the price has declined 47% in a year, falling short of the returns you could get by investing in an index fund.
Check out our latest analysis for Bellamy's Australia
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 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 Bellamy's Australia share price fell, it actually saw its earnings per share (EPS) improve by 75%. 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.
On the other hand, we're certainly perturbed by the 4.5% decline in Bellamy's Australia's revenue. If the market sees the weak revenue as jeopardising EPS, that could explain the lower share price.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Bellamy's Australia 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 Bellamy's Australia's total shareholder return (TSR) and its share price return. 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. Bellamy's Australia's TSR of was a loss of 47% for the year. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Over the last year, Bellamy's Australia shareholders took a loss of 47%. In contrast the market gained about 8.8%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 0.2% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
