NF Holdings' (TSE:6864) earnings trajectory could turn positive as the stock pops 22% this past week

NF Holdings Corporation (TSE:6864) shareholders will doubtless be very grateful to see the share price up 40% in the last month. But don't envy holders -- looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 60% after a long stretch. So is the recent increase sufficient to restore confidence in the stock? Not yet. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.

While the stock has risen 22% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for NF Holdings

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. 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.

Looking back five years, both NF Holdings' share price and EPS declined; the latter at a rate of 21% per year. The share price decline of 17% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for NF Holdings the TSR over the last 5 years was -55%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in NF Holdings had a tough year, with a total loss of 16% (including dividends), against a market gain of about 19%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 6 warning signs for NF Holdings (2 don't sit too well with us!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese 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.