Diversification is a key tool for dealing with stock price volatility. But the goal is to pick stocks that do better than average. Nature's Sunshine Products, Inc. (NASDAQ:NATR) has done well over the last year, with the stock price up 25% beating the market return of 22% (not including dividends). The longer term returns have not been as good, with the stock price only 13% higher than it was three years ago.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last year Nature's Sunshine Products grew its earnings per share (EPS) by 261%. It's fair to say that the share price gain of 25% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Nature's Sunshine Products as it was before. This could be an opportunity.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Nature's Sunshine Products' earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Nature's Sunshine Products' total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that Nature's Sunshine Products' TSR of 25% over the last year is better than the share price return.
A Different Perspective
Nature's Sunshine Products shareholders have received returns of 25% over twelve months, which isn't far from the general market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 0.2% over the last five years. While 'turnarounds seldom turn' there are green shoots for Nature's Sunshine Products. It's always interesting to track share price performance over the longer term. But to understand Nature's Sunshine Products better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Nature's Sunshine Products you should be aware of, and 1 of them is concerning.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
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