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Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Healthcare Services Group, Inc. (NASDAQ:HCSG) share price is down 29% in the last year. That's disappointing when you consider the market returned 6.6%. Zooming out, the stock is down 24% in the last three years. And the share price decline continued over the last week, dropping some 8.2%.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Even though the Healthcare Services Group share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past. It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.
Revenue was fairly steady year on year, which isn't usually such a bad thing. But the share price might be lower because the market expected a meaningful improvement, and got none.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
We know that Healthcare Services Group has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Healthcare Services Group in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We've already covered Healthcare Services Group's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Healthcare Services Group's TSR, which was a 27% drop over the last year, was not as bad as the share price return.
A Different Perspective
Healthcare Services Group shareholders are down 27% for the year (even including dividends), but the market itself is up 6.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 2.5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before spending more time on Healthcare Services Group it might be wise to click here to see if insiders have been buying or selling shares.
But note: Healthcare Services Group 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.
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.