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If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. But H&T Group plc (LON:HAT) has fallen short of that second goal, with a share price rise of 29% over five years, which is below the market return. Zooming in, the stock is up just 2.2% in the last year.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Over half a decade, H&T Group managed to grow its earnings per share at 3.1% a year. This EPS growth is lower than the 5% 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.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that H&T Group has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling H&T Group stock, you should check out this FREE detailed report on its balance sheet .
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 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. In the case of H&T Group, it has a TSR of 52% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
H&T Group shareholders are up 6.8% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 9% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand H&T Group better, we need to consider many other factors. Even so, be aware that H&T Group is showing 2 warning signs in our investment analysis , you should know about...