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The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. For example, the Mitchells & Butlers plc (LON:MAB) share price is up 37% in the last 1 year, clearly besting the market return of around 5.7% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! However, the stock hasn't done so well in the longer term, with the stock only up 12% in three years.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Mitchells & Butlers
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).
Mitchells & Butlers went from making a loss to reporting a profit, in the last year.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
We think that the revenue growth of 12% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Mitchells & Butlers is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Mitchells & Butlers in this interactive graph of future profit estimates.
A Different Perspective
It's good to see that Mitchells & Butlers has rewarded shareholders with a total shareholder return of 37% in the last twelve months. That gain is better than the annual TSR over five years, which is 2%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Mitchells & Butlers better, we need to consider many other factors. Even so, be aware that Mitchells & Butlers is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...