Stock Analysis

High Liner Foods (TSE:HLF) Share Prices Have Dropped 71% In The Last Five Years

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TSX:HLF
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Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. For example the High Liner Foods Incorporated (TSE:HLF) share price dropped 71% over five years. That's not a lot of fun for true believers. And some of the more recent buyers are probably worried, too, with the stock falling 48% in the last year. The falls have accelerated recently, with the share price down 12% in the last three months.

Check out our latest analysis for High Liner Foods

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years over which the share price declined, High Liner Foods' earnings per share (EPS) dropped by 22% each year. In this case, the EPS change is really very close to the share price drop of 22% a year. That suggests that the market sentiment around the company hasn't changed much over that time. So it's fair to say the share price has been responding to changes in EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
TSX:HLF Earnings Per Share Growth July 30th 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, High Liner Foods' TSR for the last 5 years was -65%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 3.3% in the twelve months, High Liner Foods shareholders did even worse, losing 46% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. 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. 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. Even so, be aware that High Liner Foods is showing 4 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

High Liner Foods 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 CA exchanges.

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