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Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the HUB24 Limited (ASX:HUB) share price. It's 760% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. But it's down 4.7% in the last week. However, this might be related to the overall market decline of 3.1% in a week. Anyone who held for that rewarding ride would probably be keen to talk about it.
Although HUB24 has shed AU$319m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
See our latest analysis for HUB24
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Over half a decade, HUB24 managed to grow its earnings per share at 35% a year. This EPS growth is lower than the 54% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 110.86.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that HUB24 has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at HUB24's financial health with this free report on its balance sheet.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, HUB24's TSR for the last 5 years was 793%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that HUB24 has rewarded shareholders with a total shareholder return of 110% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 55%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.