These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Fresh Del Monte Produce Inc. (NYSE:FDP) share price is 29% higher than it was a year ago, much better than the market return of around 2.5% (not including dividends) in the same period. That's a solid performance by our standards! The longer term returns are positive, with the share price up 28% in three years.
Since it's been a strong week for Fresh Del Monte Produce shareholders, let's have a look at trend of the longer term fundamentals.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the last year Fresh Del Monte Produce grew its earnings per share, moving from a loss to a profit.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Fresh Del Monte Produce has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Fresh Del Monte Produce stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Fresh Del Monte Produce's TSR for the last 1 year was 34%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Fresh Del Monte Produce has rewarded shareholders with a total shareholder return of 34% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. To that end, you should be aware of the 3 warning signs we've spotted with Fresh Del Monte Produce .
We will like Fresh Del Monte Produce better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.