The one-year loss for Domino's Pizza Enterprises (ASX:DMP) shareholders likely driven by its shrinking earnings
Taking the occasional loss comes part and parcel with investing on the stock market. And there's no doubt that Domino's Pizza Enterprises Limited (ASX:DMP) stock has had a really bad year. The share price is down a hefty 56% in that time. On the bright side, the stock is actually up 16% in the last three years. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.
While the last year has been tough for Domino's Pizza Enterprises shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
View our latest analysis for Domino's Pizza Enterprises
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Unhappily, Domino's Pizza Enterprises had to report a 14% decline in EPS over the last year. This reduction in EPS is not as bad as the 56% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Domino's Pizza Enterprises' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 4.6% in the twelve months, Domino's Pizza Enterprises shareholders did even worse, losing 55% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Domino's Pizza Enterprises , and understanding them should be part of your investment process.
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 AU exchanges.
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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.
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