Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Givaudan SA (VTX:GIVN) have tasted that bitter downside in the last year, as the share price dropped 36%. That contrasts poorly with the market decline of 14%. The silver lining (for longer term investors) is that the stock is still 5.2% higher than it was three years ago.
Since Givaudan has shed CHF1.1b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for Givaudan
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.
Unhappily, Givaudan had to report a 3.8% decline in EPS over the last year. This reduction in EPS is not as bad as the 36% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Givaudan's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 14% in the twelve months, Givaudan shareholders did even worse, losing 35% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 8% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Givaudan you should know about.
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 CH 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.
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