Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Helios Technologies, Inc. (NYSE:HLIO) share price is down 28% in the last year. That contrasts poorly with the market return of 15%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 17% in three years. The share price has dropped 29% in three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Unhappily, Helios Technologies had to report a 51% decline in EPS over the last year. This fall in the EPS is significantly worse than the 28% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Helios Technologies has grown profits over the years, but the future is more important for shareholders. This free interactive report on Helios Technologies' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in Helios Technologies had a tough year, with a total loss of 27% (including dividends), against a market gain of about 15%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 1.4%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Helios Technologies better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Helios Technologies (including 1 which is a bit unpleasant) .
We will like Helios Technologies better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.