Shareholders in Young's Brewery (LON:YNGA) are in the red if they invested three years ago

For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Young & Co.'s Brewery, P.L.C. (LON:YNGA) shareholders, since the share price is down 44% in the last three years, falling well short of the market decline of around 12%. The more recent news is of little comfort, with the share price down 39% in a year. Even worse, it's down 20% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 10% in the same time period.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Young's Brewery

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Young's Brewery moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

We think that the revenue decline over three years, at a rate of 17% per year, probably had some shareholders looking to sell. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Young's Brewery will earn in the future (free profit forecasts).

A Different Perspective

We regret to report that Young's Brewery shareholders are down 38% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 27%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 be aware of the 2 warning signs we've spotted with Young's Brewery .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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