Tiger Brands (JSE:TBS) shareholders have earned a 2.1% CAGR over the last five years
The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Tiger Brands Limited (JSE:TBS) shareholders for doubting their decision to hold, with the stock down 18% over a half decade.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Tiger 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 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.
While the share price declined over five years, Tiger Brands actually managed to increase EPS by an average of 2.4% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
With EPS gaining and a declining share price, one would suggest the market is cooling on its view of the company. Having said that, if the EPS gains continue we'd expect the share price to improve, longer term.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Tiger Brands' key metrics by checking this interactive graph of Tiger Brands's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Tiger Brands the TSR over the last 5 years was 11%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Tiger Brands shareholders have received a total shareholder return of 18% over one year. That's including the dividend. That's better than the annualised return of 2% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Tiger Brands you should know about.
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 South African 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.
