Fresh Del Monte Produce (NYSE:FDP) rises 3.8% this week, taking one-year gains to 22%

Simply Wall St · 10/17 10:40

We believe investing is smart because history shows that stock markets go higher in the long term. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the Fresh Del Monte Produce Inc. (NYSE:FDP) share price is up 18% in the last year, that falls short of the market return. In contrast, the longer term returns are negative, since the share price is 12% lower than it was three years ago.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Fresh Del Monte Produce

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 last year Fresh Del Monte Produce saw its earnings per share (EPS) drop below zero. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. It may be that the company has done well on other metrics.

Fresh Del Monte Produce's revenue actually dropped 3.3% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
NYSE:FDP Earnings and Revenue Growth October 17th 2024

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Fresh Del Monte Produce in this interactive graph of future profit estimates.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Fresh Del Monte Produce, it has a TSR of 22% for the last 1 year. 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

Fresh Del Monte Produce provided a TSR of 22% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 4% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. 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. For instance, we've identified 2 warning signs for Fresh Del Monte Produce that you should be aware of.

Fresh Del Monte Produce is not the only stock that insiders are buying. For those who like to find lesser know companies 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 American exchanges.