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This week we saw the The Hain Celestial Group, Inc. (NASDAQ:HAIN) share price climb by 16%. But that doesn't change the fact that the returns over the last three years have been stomach churning. To wit, the share price sky-dived 86% in that time. So it's about time shareholders saw some gains. Of course the real question is whether the business can sustain a turnaround. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
On a more encouraging note the company has added US$56m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
Check out our latest analysis for Hain Celestial Group
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Hain Celestial Group has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics may better explain the share price move.
We think that the revenue decline over three years, at a rate of 4.0% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Hain Celestial Group
A Different Perspective
While the broader market gained around 8.5% in the last year, Hain Celestial Group shareholders lost 52%. 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 13% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Hain Celestial Group .