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Del Monte Pacific Limited (SGX:D03) shareholders should be happy to see the share price up 14% in the last week. But the last three years have seen a terrible decline. The share price has sunk like a leaky ship, down 80% in that time. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
On a more encouraging note the company has added S$17m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
Del Monte Pacific wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years, Del Monte Pacific saw its revenue grow by 2.4% per year, compound. That's not a very high growth rate considering it doesn't make profits. But the share price crash at 22% per year does seem a bit harsh! While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market gained around 19% in the last year, Del Monte Pacific shareholders lost 26%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.7% 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. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Del Monte Pacific you should know about.