Yahoo Finance Earnings are growing at Horace Mann Educators (NYSE:HMN) but shareholders still don't like its prospects
For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Horace Mann Educators Corporation (NYSE:HMN) shareholders, since the share price is down 11% in the last three years, falling well short of the market return of around 41%. Furthermore, it's down 11% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 5.1% in the same timeframe.
With the stock having lost 6.6% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Check out our latest analysis for Horace Mann Educators
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the unfortunate three years of share price decline, Horace Mann Educators actually saw its earnings per share (EPS) improve by 57% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
It's strange to see such muted share price performance despite sustained growth. Perhaps a clue lies in other metrics. Therefore, we should look at some other metrics to try to understand why the market is disappointed.
With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. There doesn't seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Horace Mann Educators, it has a TSR of -3.4% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Although it hurts that Horace Mann Educators returned a loss of 1.9% in the last twelve months, the broader market was actually worse, returning a loss of 14%. Longer term investors wouldn't be so upset, since they would have made 1.2%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Horace Mann Educators is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
