U.S. markets close in 1 hour 6 minutes
  • S&P 500

    3,854.99
    +23.60 (+0.62%)
     
  • Dow 30

    31,110.25
    +142.43 (+0.46%)
     
  • Nasdaq

    11,400.75
    +78.52 (+0.69%)
     
  • Russell 2000

    1,730.87
    -10.46 (-0.60%)
     
  • Crude Oil

    98.36
    -1.14 (-1.15%)
     
  • Gold

    1,738.00
    -25.90 (-1.47%)
     
  • Silver

    19.20
    +0.08 (+0.41%)
     
  • EUR/USD

    1.0184
    -0.0086 (-0.84%)
     
  • 10-Yr Bond

    2.9120
    +0.1030 (+3.67%)
     
  • GBP/USD

    1.1926
    -0.0026 (-0.22%)
     
  • USD/JPY

    135.9240
    +0.0820 (+0.06%)
     
  • BTC-USD

    20,392.35
    +463.67 (+2.33%)
     
  • CMC Crypto 200

    442.01
    +6.49 (+1.49%)
     
  • FTSE 100

    7,107.77
    +82.30 (+1.17%)
     
  • Nikkei 225

    26,107.65
    -315.82 (-1.20%)
     

Treasury Wine Estates (ASX:TWE) stock falls 4.0% in past week as three-year earnings and shareholder returns continue downward trend

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Treasury Wine Estates Limited (ASX:TWE) shareholders have had that experience, with the share price dropping 26% in three years, versus a market return of about 22%.

Since Treasury Wine Estates has shed AU$332m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Treasury Wine Estates

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).

Treasury Wine Estates saw its EPS decline at a compound rate of 15% per year, over the last three years. In comparison the 9% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Treasury Wine Estates' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Treasury Wine Estates, it has a TSR of -20% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 1.4% in the twelve months, Treasury Wine Estates shareholders did even worse, losing 4.8% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.8% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

Treasury Wine Estates is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.