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The HNI (NYSE:HNI) Share Price Is Down 26% So Some Shareholders Are Getting Worried

Simply Wall St

For many, the main point of investing is to generate higher returns than the overall market. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in HNI Corporation (NYSE:HNI), since the last five years saw the share price fall 26%. It's down 2.9% in the last seven days.

See our latest analysis for HNI

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During the unfortunate half decade during which the share price slipped, HNI actually saw its earnings per share (EPS) improve by 5.1% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

The revenue fall of 0.4% per year for five years is neither good nor terrible. But if the market expected durable top line growth, then that could explain the share price weakness.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NYSE:HNI Income Statement, January 27th 2020

Take a more thorough look at HNI's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for HNI the TSR over the last 5 years was -15%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

HNI shareholders gained a total return of 0.9% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 3.2% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand HNI better, we need to consider many other factors. For example, we've discovered 1 warning sign for HNI that you should be aware of before investing here.

We will like HNI 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.