When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. Long term James Hardie Industries plc (ASX:JHX) shareholders would be well aware of this, since the stock is up 139% in five years. It's down 3.6% in the last seven days.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During five years of share price growth, James Hardie Industries actually saw its EPS drop 14% per year.
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
In contrast revenue growth of 10% per year is probably viewed as evidence that James Hardie Industries is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
James Hardie Industries is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling James Hardie Industries stock, you should check out this free report showing analyst consensus estimates for future profits.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between James Hardie Industries' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for James Hardie Industries shareholders, and that cash payout contributed to why its TSR of 164%, over the last 5 years, is better than the share price return.
A Different Perspective
We're pleased to report that James Hardie Industries shareholders have received a total shareholder return of 25% over one year. That's better than the annualised return of 21% over half a decade, implying that the company is doing better recently. 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 James Hardie Industries better, we need to consider many other factors. For example, we've discovered 3 warning signs for James Hardie Industries that you should be aware of before investing here.
But note: James Hardie Industries 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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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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