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Shareholders in Nomad Foods (NYSE:NOMD) Are in the Red If They Invested a Year Ago

Simply Wall St ·  Sep 14, 2022 06:41

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Nomad Foods Limited (NYSE:NOMD) share price is down 34% in the last year. That contrasts poorly with the market decline of 16%. However, the longer term returns haven't been so bad, with the stock down 18% in the last three years. More recently, the share price has dropped a further 10% in a month. We do note, however, that the broader market is down 8.1% in that period, and this may have weighed on the share price.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Nomad Foods

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the unfortunate twelve months during which the Nomad Foods share price fell, it actually saw its earnings per share (EPS) improve by 1.5%. It's quite possible that growth expectations may have been unreasonable in the past.

It seems quite likely that the market was expecting higher growth from the stock. But other metrics might shed some light on why the share price is down.

Nomad Foods managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growthNYSE:NOMD Earnings and Revenue Growth September 14th 2022

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We regret to report that Nomad Foods shareholders are down 34% for the year. Unfortunately, that's worse than the broader market decline of 16%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Even so, be aware that Nomad Foods is showing 1 warning sign in our investment analysis , you should know about...

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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