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USANA Health Sciences, Inc. (NYSE:USNA) shareholders should be happy to see the share price up 26% in the last month. But that is little comfort to those holding over the last half decade, sitting on a big loss. In that time the share price has delivered a rude shock to holders, who find themselves down 64% after a long stretch. So is the recent increase sufficient to restore confidence in the stock? Not yet. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Looking back five years, both USANA Health Sciences' share price and EPS declined; the latter at a rate of 17% per year. This change in EPS is reasonably close to the 19% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
Investors in USANA Health Sciences had a tough year, with a total loss of 40%, against a market gain of about 13%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Take risks, for example - USANA Health Sciences has 2 warning signs we think you should be aware of.