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The nature of investing is that you win some, and you lose some. Anyone who held Fevertree Drinks PLC (LON:FEVR) over the last year knows what a loser feels like. The share price is down a hefty 54% in that time. We note that it has not been easy for shareholders over three years, either; the share price is down 50% in that time. Furthermore, it's down 38% in about a quarter. That's not much fun for holders.
After losing 16% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Check out our latest analysis for Fevertree Drinks
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 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.
During the unfortunate twelve months during which the Fevertree Drinks share price fell, it actually saw its earnings per share (EPS) improve by 6.7%. It could be that the share price was previously over-hyped.
The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.
Given the yield is quite low, at 1.5%, we doubt the dividend can shed much light on the share price. Fevertree Drinks managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Fevertree Drinks in this interactive graph of future profit estimates.
A Different Perspective
We regret to report that Fevertree Drinks shareholders are down 52% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.8%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. To that end, you should be aware of the 1 warning sign we've spotted with Fevertree Drinks .