Natural Health Trends (NASDAQ:NHTC) shareholders have lost 24% over 1 year, earnings decline likely the culprit

It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Natural Health Trends Corp. (NASDAQ:NHTC) shareholders over the last year, as the share price declined 35%. That's well below the market return of 21%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 18% in three years. And the share price decline continued over the last week, dropping some 11%.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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While Natural Health Trends made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In just one year Natural Health Trends saw its revenue fall by 2.1%. That looks pretty grim, at a glance. Shareholders have seen the share price drop 35% in that time. That seems pretty reasonable given the lack of both profits and revenue growth. It's hard to escape the conclusion that buyers must envision either growth down the track, cost cutting, or both.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Natural Health Trends' TSR for the last 1 year was -24%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Natural Health Trends shareholders are down 24% for the year (even including dividends), but the market itself is up 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 8%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Natural Health Trends is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...

But note: Natural Health Trends 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 American 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.