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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the HMN Financial, Inc. (NASDAQ:HMNF) share price is up 73% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 10.0% in that time.
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.
Over half a decade, HMN Financial managed to grow its earnings per share at 26% a year. The EPS growth is more impressive than the yearly share price gain of 12% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 8.52 also suggests market apprehension.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on HMN Financial's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
HMN Financial shareholders are down 10.0% for the year, but the market itself is up 28%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 12% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - HMN Financial has 2 warning signs we think you should be aware of.
HMN Financial is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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