Investors more bullish on Hiab Oyj (HEL:HIAB) this week as stock ascends 3.3%, despite earnings trending downwards over past three years

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, Hiab Oyj (HEL:HIAB) shareholders have seen the share price rise 63% over three years, well in excess of the market return (5.1%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 1.7% in the last year, including dividends.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years of share price growth, Hiab Oyj actually saw its earnings per share (EPS) drop 17% per year.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Therefore, we think it's worth considering other metrics as well.

You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 39% per year). What's clear is that historic earnings and revenue aren't matching up with the share price action, very well. So you might have to dig deeper to get a grasp of the situation

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Hiab Oyj's financial health with this free 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Hiab Oyj the TSR over the last 3 years was 205%, 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

Hiab Oyj provided a TSR of 1.7% over the last twelve months. 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 26% 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 Hiab Oyj you might want to consider these 3 valuation metrics.

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