Did You Avoid Bearing A 5.2% Loss From Owning Becker Milk (TSE:BEK.B) Shares?

For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in The Becker Milk Company Limited (TSE:BEK.B), since the last five years saw the share price fall 37%. The falls have accelerated recently, with the share price down 20% in the last three months. Of course, this share price action may well have been influenced by the 20% decline in the broader market, throughout the period.

View our latest analysis for Becker Milk

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

While the share price declined over five years, Becker Milk actually managed to increase EPS by an average of 9.7% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

The steady dividend doesn't really explain why the share price is down. However, revenue has declined at a compound annual rate of 6.4% per year. With dividends up, but revenue down, some investors might be concluding that the company is no longer growing.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Becker Milk's balance sheet strength is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Becker Milk, it has a TSR of -5.2% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While it's certainly disappointing to see that Becker Milk shares lost 6.6% throughout the year, that wasn't as bad as the market loss of 16%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 1.1% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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. For instance, we've identified 5 warning signs for Becker Milk (1 can't be ignored) that you should be aware of.

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 CA exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.