The Habit Restaurants, Inc. (NASDAQ:HABT) shareholders will doubtless be very grateful to see the share price up 39% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 24% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
Habit Restaurants became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.
We note that, in three years, revenue has actually grown at a 17% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Habit Restaurants more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Habit Restaurants has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Habit Restaurants in this interactive graph of future profit estimates.
A Different Perspective
Over the last year, Habit Restaurants shareholders took a loss of 23%. In contrast the market gained about 15%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 8.8% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before spending more time on Habit Restaurants it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.