The three-year decline in earnings for Brinker International NYSE:EAT) isn't encouraging, but shareholders are still up 362% over that period
Brinker International, Inc. (NYSE:EAT) shareholders have seen the share price descend 13% over the month. But over three years the performance has been really wonderful. Over that time, we've been excited to watch the share price climb an impressive 362%. As long term investors the recent fall doesn't detract all that much from the longer term story. The thing to consider is whether there is still too much elation around the company's prospects.
Since the long term performance has been good but there's been a recent pullback of 8.1%, let's check if the fundamentals match the share price.
View our latest analysis for Brinker International
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the three years of share price growth, Brinker International actually saw its earnings per share (EPS) drop 23% per year.
So we doubt that the market is looking to EPS for its main judge of the company's value. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
It could be that the revenue growth of 8.8% per year is viewed as evidence that Brinker International is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. So it makes a lot of sense to check out what analysts think Brinker International will earn in the future (free profit forecasts).
A Different Perspective
While it's never nice to take a loss, Brinker International shareholders can take comfort that their trailing twelve month loss of 1.6% wasn't as bad as the market loss of around 10%. Longer term investors wouldn't be so upset, since they would have made 0.5%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. Even so, be aware that Brinker International is showing 5 warning signs in our investment analysis , and 1 of those is significant...
We will like Brinker International better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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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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