Shareholders in Fevertree Drinks (LON:FEVR) are in the red if they invested five years ago
Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. For example the Fevertree Drinks PLC (LON:FEVR) share price dropped 62% over five years. We certainly feel for shareholders who bought near the top. Furthermore, it's down 18% 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.
See our latest analysis for Fevertree Drinks
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Looking back five years, both Fevertree Drinks' share price and EPS declined; the latter at a rate of 26% per year. This fall in the EPS is worse than the 18% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve. With a P/E ratio of 105.51, it's fair to say the market sees a brighter future for the business.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Fevertree Drinks' TSR for the last 5 years was -60%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 0.4% in the twelve months, Fevertree Drinks shareholders did even worse, losing 2.9% (even including dividends). 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. However, the loss over the last year isn't as bad as the 10% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Fevertree Drinks you should know about.
Fevertree Drinks 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 British 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.
