Yahoo Finance Herbalife (NYSE:HLF) stock falls 6.8% in past week as three-year earnings and shareholder returns continue downward trend
It's not possible to invest over long periods without making some bad investments. But really bad investments should be rare. So spare a thought for the long term shareholders of Herbalife Ltd. (NYSE:HLF); the share price is down a whopping 80% in the last three years. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 21% lower in that time. On top of that, the share price is down 6.8% in the last week.
Since Herbalife has shed US$77m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for Herbalife
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 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 three years that the share price fell, Herbalife's earnings per share (EPS) dropped by 29% each year. This reduction in EPS is slower than the 42% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 7.71.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Herbalife's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 25% in the last year, Herbalife shareholders lost 21%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 12% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand Herbalife better, we need to consider many other factors. For example, we've discovered 3 warning signs for Herbalife (2 are significant!) that you should be aware of before investing here.
Herbalife is not the only stock that insiders are buying. For those who like to find lesser know companies 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 American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
