The five-year shareholder returns and company earnings persist lower as Healthcare Services Group (NASDAQ:HCSG) stock falls a further 4.8% in past week
We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example the Healthcare Services Group, Inc. (NASDAQ:HCSG) share price dropped 65% over five years. That's not a lot of fun for true believers. And it's not just long term holders hurting, because the stock is down 46% in the last year.
After losing 4.8% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
See our latest analysis for Healthcare Services Group
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Looking back five years, both Healthcare Services Group's share price and EPS declined; the latter at a rate of 17% per year. Notably, the share price has fallen at 19% per year, fairly close to the change in the EPS. This implies that the market has had a fairly steady view of the stock. So it's fair to say the share price has been responding to changes in EPS.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Healthcare Services Group the TSR over the last 5 years was -59%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Healthcare Services Group shareholders are down 44% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Healthcare Services Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Healthcare Services Group you should be aware of, and 1 of them is a bit concerning.
We will like Healthcare Services Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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. 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.
