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Does Herbalife Nutrition's (NYSE:HLF) Share Price Gain of 74% Match Its Business Performance?

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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 74% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 16%.

Check out our latest analysis for Herbalife Nutrition

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 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.

Over half a decade, Herbalife Nutrition managed to grow its earnings per share at 12% a year. This EPS growth is remarkably close to the 12% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

We know that Herbalife Nutrition has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Herbalife Nutrition stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Herbalife Nutrition provided a TSR of 16% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. This suggests the company might be improving over time. 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. Take risks, for example - Herbalife Nutrition has 3 warning signs (and 1 which shouldn't be ignored) we think 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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.