It's easy to match the overall 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 Hingham Institution for Savings (NASDAQ:HIFS) shareholders over the last year, as the share price declined 37%. That's disappointing when you consider the market returned 18%. However, the longer term returns haven't been so bad, with the stock down 24% in the last three years. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

If the past week is anything to go by, investor sentiment for Hingham Institution for Savings isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Hingham Institution for Savings

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).

Unhappily, Hingham Institution for Savings had to report a 24% decline in EPS over the last year. The share price decline of 37% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The P/E ratio of 10.54 also points to the negative market sentiment.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Hingham Institution for Savings' earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 18% in the last year, Hingham Institution for Savings shareholders lost 36% (even including dividends). 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 4% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Hingham Institution for Savings , and understanding them should be part of your investment process.

Hingham Institution for Savings 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 American 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.