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Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. Unfortunately the Heritage Insurance Holdings, Inc. (NYSE:HRTG) share price slid 12% over twelve months. That falls noticeably short of the market return of around 4.0%. However, the longer term returns haven’t been so bad, with the stock down 2.6% in the last three years. The silver lining is that the stock is up 1.9% in about a week.
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 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).
Heritage Insurance Holdings managed to increase earnings per share from a loss to a profit, over the last 12 months. When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action. So it makes sense to check out some other factors.
Given the yield is quite low, at 1.6%, we doubt the dividend can shed much light on the share price. Heritage Insurance Holdings’s revenue is actually up 18% over the last year. Since the fundamental metrics don’t readily explain the share price drop, there might be an opportunity if the market has overreacted.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Heritage Insurance Holdings stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between Heritage Insurance Holdings’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings. Dividends have been really beneficial for Heritage Insurance Holdings shareholders, and that cash payout explains why its total shareholder loss of 10%, over the last year, isn’t as bad as the share price return.
A Different Perspective
Over the last year, Heritage Insurance Holdings shareholders took a loss of 10%, including dividends. In contrast the market gained about 4.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 0.7% per year over three years. Sometimes when a good quality long term winner has a weak period, it’s turns out to be an opportunity, but you really need to be sure that the quality is there. 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.
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.