Advertisement
UK markets close in 7 hours 55 minutes
  • FTSE 100

    7,950.17
    +18.19 (+0.23%)
     
  • FTSE 250

    19,757.30
    -53.36 (-0.27%)
     
  • AIM

    741.21
    -0.90 (-0.12%)
     
  • GBP/EUR

    1.1681
    +0.0012 (+0.10%)
     
  • GBP/USD

    1.2605
    -0.0033 (-0.26%)
     
  • Bitcoin GBP

    55,983.82
    +588.05 (+1.06%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,248.49
    +44.91 (+0.86%)
     
  • DOW

    39,760.08
    +477.75 (+1.22%)
     
  • CRUDE OIL

    81.84
    +0.49 (+0.60%)
     
  • GOLD FUTURES

    2,215.00
    +2.30 (+0.10%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     
  • HANG SENG

    16,541.42
    +148.58 (+0.91%)
     
  • DAX

    18,474.95
    -2.14 (-0.01%)
     
  • CAC 40

    8,217.09
    +12.28 (+0.15%)
     

Maple Leaf Foods' (TSE:MFI) investors will be pleased with their 14% return over the last year

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. Over the last year the Maple Leaf Foods Inc. (TSE:MFI) share price is up 11%, but that's less than the broader market return. However, the stock hasn't done so well in the longer term, with the stock only up 1.0% in three years.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Maple Leaf Foods

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

ADVERTISEMENT

Maple Leaf Foods was able to grow EPS by 20% in the last twelve months. It's fair to say that the share price gain of 11% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Maple Leaf Foods as it was before. This could be an opportunity.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

We know that Maple Leaf Foods has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Maple Leaf Foods the TSR over the last 1 year was 14%, 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

Maple Leaf Foods shareholders gained a total return of 14% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This suggests the company might be improving over 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Maple Leaf Foods (of which 1 is a bit unpleasant!) you should know about.

Of course Maple Leaf Foods may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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