For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in PetMed Express, Inc. (NASDAQ:PETS), since the last five years saw the share price fall 42%. And it's not just long term holders hurting, because the stock is down 26% in the last year.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for PetMed Express
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...' 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).
During the five years over which the share price declined, PetMed Express' earnings per share (EPS) dropped by 6.0% each year. This reduction in EPS is less than the 10% annual reduction in the share price. 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 PetMed Express' key metrics by checking this interactive graph of PetMed Express'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 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. We note that for PetMed Express the TSR over the last 5 years was -29%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market lost about 19% in the twelve months, PetMed Express shareholders did even worse, losing 22% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For instance, we've identified 1 warning sign for PetMed Express that you should be aware of.