Stock Analysis

HiTech Group Australia (ASX:HIT) Has Rewarded Shareholders With An Exceptional 703% Total Return On Their Investment

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ASX:HIT
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We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. For example, the HiTech Group Australia Limited (ASX:HIT) share price is up a whopping 470% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 20% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 14% in 90 days).

View our latest analysis for HiTech Group Australia

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 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 five years of share price growth, HiTech Group Australia achieved compound earnings per share (EPS) growth of 27% per year. This EPS growth is slower than the share price growth of 42% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
ASX:HIT Earnings Per Share Growth December 10th 2020

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for HiTech Group Australia the TSR over the last 5 years was 703%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that HiTech Group Australia shareholders have received a total shareholder return of 53% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 52%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand HiTech Group Australia better, we need to consider many other factors. Even so, be aware that HiTech Group Australia is showing 2 warning signs in our investment analysis , you should know about...

But note: HiTech Group Australia 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 AU exchanges.

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