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For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term SpartanNash Company (NASDAQ:SPTN) shareholders, since the share price is down 45% in the last three years, falling well short of the market return of around 21%. On top of that, the share price is down 7.2% in the last week.
Since SpartanNash has shed US$50m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the three years that the share price fell, SpartanNash's earnings per share (EPS) dropped by 84% each year. This was, in part, due to extraordinary items impacting earnings. This fall in the EPS is worse than the 18% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. With a P/E ratio of 2.16k, it's fair to say the market sees a brighter future for the business.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on SpartanNash'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, SpartanNash's TSR for the last 3 years was -38%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that SpartanNash has rewarded shareholders with a total shareholder return of 5.5% in the last twelve months. That's including the dividend. However, the TSR over five years, coming in at 7% per year, is even more impressive. 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. To that end, you should learn about the 4 warning signs we've spotted with SpartanNash (including 1 which is a bit unpleasant) .