When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Herbalife Nutrition Ltd. (NYSE:HLF) share price is up 53% in the last five years, that's less than the market return. Zooming in, the stock is up just 1.2% in the last year.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Herbalife Nutrition achieved compound earnings per share (EPS) growth of 12% per year. The EPS growth is more impressive than the yearly share price gain of 9% over the same period. So it seems the market isn't so enthusiastic about the stock these days.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Herbalife Nutrition has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Herbalife Nutrition's financial health with this free report on its balance sheet.
A Different Perspective
Herbalife Nutrition provided a TSR of 1.2% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 9% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Herbalife Nutrition better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Herbalife Nutrition (of which 1 is potentially serious!) you should know about.
But note: Herbalife Nutrition 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.
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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. 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.
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