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Investors more bullish on B&G Foods (NYSE:BGS) this week as stock rallies 3.4%, despite earnings trending downwards over past five years

·3-min read

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term B&G Foods, Inc. (NYSE:BGS) shareholders for doubting their decision to hold, with the stock down 26% over a half decade.

While the stock has risen 3.4% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for B&G Foods

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Looking back five years, both B&G Foods' share price and EPS declined; the latter at a rate of 5.8% per year. In this case, the EPS change is really very close to the share price drop of 6% a year. That suggests that the market sentiment around the company hasn't changed much over that time. So it's fair to say the share price has been responding to changes in EPS.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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 B&G Foods the TSR over the last 5 years was 5.2%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that B&G Foods has rewarded shareholders with a total shareholder return of 24% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 1.0%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand B&G Foods better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with B&G Foods (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

But note: B&G Foods may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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