Some Hooker Furniture (NASDAQ:HOFT) Shareholders Have Copped A Big 60% Share Price Drop

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Investing in stocks comes with the risk that the share price will fall. And there’s no doubt that Hooker Furniture Corporation (NASDAQ:HOFT) stock has had a really bad year. The share price is down a hefty 60% in that time. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 13% in three years. On top of that, the share price has dropped a further 30% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

Check out our latest analysis for Hooker Furniture

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.

During the unfortunate twelve months during which the Hooker Furniture share price fell, it actually saw its earnings per share (EPS) improve by 12%. It could be that the share price was previously over-hyped. It’s surprising to see the share price fall so much, despite the improved EPS. So it’s easy to justify a look at some other metrics.

Hooker Furniture’s revenue is actually up 6.7% over the last year. Since the fundamental metrics don’t readily explain the share price drop, there might be an opportunity if the market has overreacted.

The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).

NasdaqGS:HOFT Income Statement, June 20th 2019
NasdaqGS:HOFT Income Statement, June 20th 2019

It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Hooker Furniture stock, you should check out this free report showing analyst profit forecasts.

What about the Total Shareholder Return (TSR)?

We’ve already covered Hooker Furniture’s share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Hooker Furniture’s TSR of was a loss of 59% for the year. That wasn’t as bad as its share price return, because it has paid dividends.

A Different Perspective

Investors in Hooker Furniture had a tough year, with a total loss of 59% (including dividends), against a market gain of about 5.0%. 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 8.5%, 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Hooker Furniture by clicking this link.

Hooker Furniture is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.