Investing in Sovos Brands (NASDAQ:SOVO) a year ago would have delivered you a 69% gain
Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Sovos Brands, Inc. (NASDAQ:SOVO) share price is 69% higher than it was a year ago, much better than the market return of around 21% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
See our latest analysis for Sovos Brands
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Sovos Brands was able to grow EPS by 54% in the last twelve months. We note, however, that extraordinary items have impacted earnings. This EPS growth is significantly lower than the 69% increase in the share price. This indicates that the market is now more optimistic about the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Sovos Brands has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
Sovos Brands boasts a total shareholder return of 69% for the last year. The more recent returns haven't been as impressive as the longer term returns, coming in at just 3.6%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Sovos Brands has 1 warning sign we think you should be aware of.
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 American exchanges.
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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.
