If you buy and hold a stock for many years, you’d hope to be making a profit. Better yet, you’d like to see the share price move up more than the market average. But Hubbell Incorporated (NYSE:HUBB) has fallen short of that second goal, with a share price rise of 63% over five years, which is below the market return. Zooming in, the stock is up a respectable 6.0% in the last year.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Hubbell managed to grow its earnings per share at 6.2% a year. This EPS growth is slower than the share price growth of 10% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. 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).
This free interactive report on Hubbell’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Hubbell’s TSR for the last 5 years was 86%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Hubbell shareholders gained a total return of 8.8% during the year. Unfortunately this falls short of the market return. It’s probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 13% over five years. It’s quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we’ve identified 1 warning sign for Hubbell that you should be aware of.
But note: Hubbell may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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