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Volatility 101: Should Cal-Maine Foods (NASDAQ:CALM) Shares Have Dropped 11%?

Simply Wall St

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 Cal-Maine Foods, Inc. (NASDAQ:CALM) share price slid 11% over twelve months. That's well bellow the market return of 2.9%. On the bright side, the stock is actually up 4.6% in the last three years. Unhappily, the share price slid 2.9% in the last week.

Check out our latest analysis for Cal-Maine Foods

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Unfortunately Cal-Maine Foods reported an EPS drop of 57% for the last year. This fall in the EPS is significantly worse than the 11% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.

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

NasdaqGS:CALM Past and Future Earnings, September 21st 2019

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Cal-Maine Foods's earnings, revenue and cash flow.


What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Cal-Maine Foods's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Cal-Maine Foods's TSR of was a loss of 10.0% for the year. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Investors in Cal-Maine Foods had a tough year, with a total loss of 10.0%, against a market gain of about 2.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 2.4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you would like to research Cal-Maine Foods in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

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 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 editorial-team@simplywallst.com. 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.