In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Hallador Energy Company (NASDAQ:HNRG), since the last five years saw the share price fall 44%. And it’s not just long term holders hurting, because the stock is down 27% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 11% in thirty days.
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. 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.
During the five years over which the share price declined, Hallador Energy’s earnings per share (EPS) dropped by 21% each year. The share price decline of 11% per year isn’t as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Hallador Energy, it has a TSR of -37% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Hallador Energy shareholders are down 25% for the year (even including dividends), but the market itself is up 9.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8.8% over the last half decade. 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. Before spending more time on Hallador Energy it might be wise to click here to see if insiders have been buying or selling shares.
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 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 email@example.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.