Shareholders in Jubilant FoodWorks (NSE:JUBLFOOD) are in the red if they invested a year ago
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Jubilant FoodWorks Limited (NSE:JUBLFOOD) shareholders over the last year, as the share price declined 22%. That's disappointing when you consider the market returned 4.1%. The silver lining (for longer term investors) is that the stock is still 10% higher than it was three years ago.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Unhappily, Jubilant FoodWorks had to report a 26% decline in EPS over the last year. This proportional reduction in earnings per share isn't far from the 22% decrease in the share price. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Instead, the change in the share price seems to reduction in earnings per share, alone.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Jubilant FoodWorks' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Jubilant FoodWorks shareholders are down 22% for the year (even including dividends), but the market itself is up 4.1%. 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 0.3% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Jubilant FoodWorks you should be aware of, and 1 of them makes us a bit uncomfortable.
Of course Jubilant FoodWorks 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 Indian 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.