If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Pilgrim’s Pride Corporation (NASDAQ:PPC) share price is 69% higher than it was a year ago, much better than the market return of around -1.3% (not including dividends) in the same period. So that should have shareholders smiling. Also impressive, the stock is up 32% over three years, making long term shareholders happy, too.
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 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, Pilgrim’s Pride actually saw its earnings per share drop 54%. So we don’t think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Pilgrim’s Pride’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Pilgrim’s Pride shareholders, and that cash payout contributed to why its TSR of 69%, over the last year, is better than the share price return.
A Different Perspective
It’s good to see that Pilgrim’s Pride has rewarded shareholders with a total shareholder return of 69% in the last twelve months. That gain is better than the annual TSR over five years, which is 6.3%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on Pilgrim’s Pride it might be wise to click here to see if insiders have been buying or selling shares.
We will like Pilgrim’s Pride 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 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 firstname.lastname@example.org. 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.