In This Article:
For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Domino's Pizza Group plc (LON:DOM) shareholders, since the share price is down 20% in the last three years, falling well short of the market decline of around 13%.
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 Domino's Pizza Group
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Domino's Pizza Group's earnings per share (EPS) dropped by 0.4% each year. The share price decline of 7% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Domino's Pizza Group's key metrics by checking this interactive graph of Domino's Pizza Group's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Domino's Pizza Group, it has a TSR of -12% for the last 3 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
Domino's Pizza Group shareholders are down 11% for the year (even including dividends), but the market itself is up 14%. 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 6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Domino's Pizza Group better, we need to consider many other factors. For example, we've discovered 4 warning signs for Domino's Pizza Group (1 doesn't sit too well with us!) that you should be aware of before investing here.