Harvey Norman Holdings' (ASX:HVN) Shareholders Are Down 10% On Their Shares

It is doubtless a positive to see that the Harvey Norman Holdings Limited (ASX:HVN) share price has gained some 40% in the last three months. But that doesn't alter the fact that returns have lagged the market over the last year. Indeed, shareholders received returns of 1.8% whereas the market is down , returning (-1.8%) over the last year.

Check out our latest analysis for Harvey Norman Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unhappily, Harvey Norman Holdings had to report a 4.2% decline in EPS over the last year. This reduction in EPS is not as bad as the 10% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

You can see below how EPS has 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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Harvey Norman Holdings' total shareholder return (TSR) and its share price return. 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. Harvey Norman Holdings' TSR of was a loss of 1.8% for the year. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

The total return of 1.8% received by Harvey Norman Holdings shareholders over the last year isn't far from the market return of -1.8%. The silver lining is that longer term investors would have made a total return of 6.4% per year over half a decade. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. 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 3 warning signs for Harvey Norman Holdings (1 doesn't sit too well with us) that you should be aware of.

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 AU exchanges.

If you decide to trade Harvey Norman Holdings, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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