Yahoo Finance Shareholders in Hooker Furnishings (NASDAQ:HOFT) are in the red if they invested five years ago
Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. For example, after five long years the Hooker Furnishings Corporation (NASDAQ:HOFT) share price is a whole 73% lower. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 50% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 18% in the same timeframe.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Hooker Furnishings
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years over which the share price declined, Hooker Furnishings' earnings per share (EPS) dropped by 35% each year. This fall in the EPS is worse than the 23% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 45.70 suggests that shareholders believe earnings will grow in the years ahead.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Hooker Furnishings' earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Hooker Furnishings, it has a TSR of -69% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
The total return of 48% received by Hooker Furnishings shareholders over the last year isn't far from the market return of -44%. So last year was actually even worse than the last five years, which cost shareholders 11% per year. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. It's always interesting to track share price performance over the longer term. But to understand Hooker Furnishings better, we need to consider many other factors. Take risks, for example - Hooker Furnishings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
Hooker Furnishings is not the only stock that insiders are buying. 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.
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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