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For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Corby Spirit and Wine Limited (TSE:CSW.A) shareholders have had that experience, with the share price dropping 25% in three years, versus a market return of about 29%.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Corby Spirit and Wine
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...' 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.
During the three years that the share price fell, Corby Spirit and Wine's earnings per share (EPS) dropped by 1.4% each year. The share price decline of 9% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Corby Spirit and Wine's key metrics by checking this interactive graph of Corby Spirit and Wine's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Corby Spirit and Wine's TSR for the last 3 years was -11%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Corby Spirit and Wine shareholders are up 7.6% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 1.5% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Corby Spirit and Wine (of which 1 is significant!) you should know about.