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Some Houghton Mifflin Harcourt (NASDAQ:HMHC) Shareholders Have Copped A Big 67% Share Price Drop

Simply Wall St

While not a mind-blowing move, it is good to see that the Houghton Mifflin Harcourt Company (NASDAQ:HMHC) share price has gained 27% in the last three months. But that doesn't change the fact that the returns over the last half decade have been disappointing. In that time the share price has delivered a rude shock to holders, who find themselves down 67% after a long stretch. So is the recent increase sufficient to restore confidence in the stock? Not yet. We'd err towards caution given the long term under-performance.

Check out our latest analysis for Houghton Mifflin Harcourt

Houghton Mifflin Harcourt wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over half a decade Houghton Mifflin Harcourt reduced its trailing twelve month revenue by 1.2% for each year. That's not what investors generally want to see. With neither profit nor revenue growth, the loss of 20% per year doesn't really surprise us. The chance of imminent investor enthusiasm for this stock seems slimmer than Louise Brooks. Not that many investors like to invest in companies that are losing money and not growing revenue.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

NasdaqGS:HMHC Income Statement, January 3rd 2020

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 report showing analyst forecasts should help you form a view on Houghton Mifflin Harcourt

A Different Perspective

While the broader market gained around 34% in the last year, Houghton Mifflin Harcourt shareholders lost 37%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 20% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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.