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There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But not every stock you buy will perform as well as the overall market. Unfortunately for shareholders, while the Heritage Financial Corporation (NASDAQ:HFWA) share price is up 22% in the last year, that falls short of the market return. Having said that, the longer term returns aren't so impressive, with stock gaining just 12% in three years.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Heritage Financial
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 last year, Heritage Financial actually saw its earnings per share drop 51%.
Given the share price gain, we doubt the market is measuring progress with EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
Heritage Financial's revenue actually dropped 21% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Heritage Financial stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Heritage Financial the TSR over the last 1 year was 28%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.