Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Hubbell Incorporated (NYSE:HUBB) share price is up 41% in the last year, clearly besting the market return of around 14% (not including dividends). That’s a solid performance by our standards! Also impressive, the stock is up 34% over three years, making long term shareholders happy, too.
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 Hubbell grew its earnings per share (EPS) by 33%. This EPS growth is reasonably close to the 41% increase in the share price. That suggests that the market sentiment around the company hasn’t changed much over that time. We don’t think its coincidental that the share price is growing at a similar rate to the earnings per share.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Hubbell has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Hubbell the TSR over the last year was 45%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It’s nice to see that Hubbell shareholders have received a total shareholder return of 45% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 8.9%. 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. Before spending more time on Hubbell it might be wise to click here to see if insiders have been buying or selling shares.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.