While it may not be enough for some shareholders, we think it is good to see the Henry Schein, Inc. (NASDAQ:HSIC) share price up 15% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 20% in the last three years, significantly under-performing the market.
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To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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 unfortunate three years of share price decline, Henry Schein actually saw its earnings per share (EPS) improve by 6.4% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past. It’s worth taking a look at other metrics, because the EPS growth doesn’t seem to match with the falling share price.
We note that, in three years, revenue has actually grown at a 5.6% annual rate, so that doesn’t seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Henry Schein more closely, as sometimes stocks fall unfairly. This could present an opportunity.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling Henry Schein stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
We’ve already covered Henry Schein’s share price action, but we should also mention its total shareholder return (TSR). 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. We note that Henry Schein’s TSR, at 2.4% is higher than its share price return of -20%. When you consider it hasn’t been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
It’s good to see that Henry Schein has rewarded shareholders with a total shareholder return of 24% in the last twelve months. That’s better than the annualised return of 8.3% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.