Yahoo Finance Earnings are growing at Hamilton Beach Brands Holding (NYSE:HBB) but shareholders still don't like its prospects
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Hamilton Beach Brands Holding Company (NYSE:HBB), since the last five years saw the share price fall 54%. More recently, the share price has dropped a further 13% in a month.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
View our latest analysis for Hamilton Beach Brands Holding
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 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 unfortunate half decade during which the share price slipped, Hamilton Beach Brands Holding actually saw its earnings per share (EPS) improve by 5.9% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.
Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.
The revenue fall of 1.7% per year for five years is neither good nor terrible. But if the market expected durable top line growth, then that could explain the share price weakness.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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. Dive deeper into the earnings by checking this interactive graph of Hamilton Beach Brands Holding's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Hamilton Beach Brands Holding the TSR over the last 5 years was -49%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Although it hurts that Hamilton Beach Brands Holding returned a loss of 11% in the last twelve months, the broader market was actually worse, returning a loss of 20%. What is more upsetting is the 8% per annum loss investors have suffered over the last half decade. While the losses are slowing we doubt many shareholders are happy with the stock. It's always interesting to track share price performance over the longer term. But to understand Hamilton Beach Brands Holding better, we need to consider many other factors. Take risks, for example - Hamilton Beach Brands Holding has 3 warning signs (and 2 which are a bit concerning) we think you should know about.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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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