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Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in HICL Infrastructure PLC (LON:HICL), since the last five years saw the share price fall 29%.
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.
View our latest analysis for HICL Infrastructure
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Looking back five years, both HICL Infrastructure's share price and EPS declined; the latter at a rate of 38% per year. This fall in the EPS is worse than the 7% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. With a P/E ratio of 80.11, it's fair to say the market sees a brighter future for the business.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
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. Dive deeper into the earnings by checking this interactive graph of HICL Infrastructure's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of HICL Infrastructure, it has a TSR of -7.4% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
HICL Infrastructure provided a TSR of 3.0% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 1.4% endured over half a decade. So this might be a sign the business has turned its fortunes around. 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 - HICL Infrastructure has 2 warning signs we think you should be aware of.