Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the FedEx Corporation (NYSE:FDX) share price slid 38% over twelve months. That's disappointing when you consider the market returned 0.5%. At least the damage isn't so bad if you look at the last three years, since the stock is down 8.6% in that time. The falls have accelerated recently, with the share price down 10% in the last three months.
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 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.
Unhappily, FedEx had to report a 88% decline in EPS over the last year. The share price fall of 38% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. With a P/E ratio of 74.28, it's fair to say the market sees an EPS rebound on the cards.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on FedEx's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We've already covered FedEx's share price action, but we should also mention its total shareholder return (TSR). 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 FedEx shareholders, and that cash payout explains why its total shareholder loss of 37%, over the last year, isn't as bad as the share price return.
A Different Perspective
While the broader market gained around 0.5% in the last year, FedEx shareholders lost 37% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 1.2%, 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of FedEx by clicking this link.
FedEx 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 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 firstname.lastname@example.org. 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.