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The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Natural Health Trends Corp. (NASDAQ:NHTC) share price is up 53% in the last five years, that's less than the market return. But if you include dividends then the return is market-beating. Unfortunately the share price is down 24% in the last year.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Given that Natural Health Trends only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Over the last half decade Natural Health Trends' revenue has actually been trending down at about 12% per year. The falling revenue is arguably somewhat reflected in the lacklustre return of 9% per year over that time. Arguably that's not bad given the soft revenue and loss-making position. We'd keep an eye on changes in the trend - there may be an opportunity if the company returns to growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Natural Health Trends stock, you should check out this FREE detailed 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Natural Health Trends' TSR for the last 5 years was 187%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Natural Health Trends had a tough year, with a total loss of 14% (including dividends), against a market gain of about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 23% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Natural Health Trends better, we need to consider many other factors. For instance, we've identified 2 warning signs for Natural Health Trends (1 doesn't sit too well with us) that you should be aware of.