When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For example, the Cott Corporation (TSE:BCB) share price has soared 111% in the last half decade. Most would be very happy with that. The last week saw the share price soften some 4.0%.
View our latest analysis for Cott
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Cott became profitable within the last five years. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. So it might be better to look at other metrics to try to understand the share price.
The modest 1.9% dividend yield is unlikely to be propping up the share price. The revenue growth of 1.6% per year hardly seems impressive. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Cott, it has a TSR of 132% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Cott had a tough year, with a total loss of 20% (including dividends) , against a market gain of about 2.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 18%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.