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We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Don’t believe it? Then look at the HiTech Group Australia Limited (ASX:HIT) share price. It’s 1523% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. Meanwhile the share price is 4.2% higher than it was a week ago.
It really delights us to see such great share price performance for investors.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, HiTech Group Australia achieved compound earnings per share (EPS) growth of 93% per year. The EPS growth is more impressive than the yearly share price gain of 75% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of HiTech Group Australia, it has a TSR of 1976% for the last 5 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
HiTech Group Australia provided a TSR of 6.5% over the last twelve months. But that return falls short of the market. 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 83% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. Before forming an opinion on HiTech Group Australia you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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 firstname.lastname@example.org. 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.