Yahoo Finance The past year for Fortune Brands Home & Security (NYSE:FBHS) investors has not been profitable
Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Fortune Brands Home & Security, Inc. (NYSE:FBHS) shareholders over the last year, as the share price declined 36%. That falls noticeably short of the market decline of around 14%. Longer term investors have fared much better, since the share price is up 34% in three years. Furthermore, it's down 21% 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 9.6% in the same timeframe.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Fortune Brands Home & Security
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).
During the unfortunate twelve months during which the Fortune Brands Home & Security share price fell, it actually saw its earnings per share (EPS) improve by 27%. It's quite possible that growth expectations may have been unreasonable in the past.
It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.
With a low yield of 1.7% we doubt that the dividend influences the share price much. Fortune Brands Home & Security's revenue is actually up 21% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Fortune Brands Home & Security is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We regret to report that Fortune Brands Home & Security shareholders are down 35% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 learn about the 3 warning signs we've spotted with Fortune Brands Home & Security (including 1 which is a bit unpleasant) .
We will like Fortune Brands Home & Security better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
