Investing in HUB24 (ASX:HUB) five years ago would have delivered you a 556% gain

Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. For example, the HUB24 Limited (ASX:HUB) share price is up a whopping 532% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 23% gain in the last three months. We love happy stories like this one. The company should be really proud of that performance!

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for HUB24

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).

Over half a decade, HUB24 managed to grow its earnings per share at 38% a year. So the EPS growth rate is rather close to the annualized share price gain of 45% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how HUB24 has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling HUB24 stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for HUB24 the TSR over the last 5 years was 556%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that HUB24 shareholders have received a total shareholder return of 100% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 46%. 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 HUB24 better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for HUB24 you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.