Buying a low-cost index fund will get you the average market return. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the Hostess Brands, Inc. (NASDAQ:TWNK) share price is up 33% in the last three years, that falls short of the market return. Zooming in, the stock is up a respectable 20% in the last year.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
Over the last three years, Hostess Brands failed to grow earnings per share, which fell 67% (annualized). Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Therefore, we think it’s worth considering other metrics as well.
You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 1.1% per year). The only thing that’s clear is there is low correlation between Hostess Brands’s share price and its historic fundamental data. Further research may be required!
The company’s revenue and earnings (over time) are depicted in the image below.
Hostess Brands is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
We’re pleased to report that Hostess Brands rewarded shareholders with a total shareholder return of 20% over the last year. That gain actually surpasses the 9.8% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. Before spending more time on Hostess Brands it might be wise to click here to see if insiders have been buying or selling shares.
But note: Hostess Brands may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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 firstname.lastname@example.org. 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.