H&K's (EPA:MLHK) five-year earnings growth trails the notable shareholder returns

It hasn't been the best quarter for H&K AG (EPA:MLHK) shareholders, since the share price has fallen 12% in that time. But at least the stock is up over the last five years. Unfortunately its return of 46% is below the market return of 67%.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, H&K achieved compound earnings per share (EPS) growth of 27% per year. This EPS growth is higher than the 8% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. Of course, with a P/E ratio of 137.11, the market remains optimistic.

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

Dive deeper into H&K's key metrics by checking this interactive graph of H&K's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for H&K the TSR over the last 5 years was 82%, 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 H&K shareholders have received a total shareholder return of 13% over the last year. That's including the dividend. Having said that, the five-year TSR of 13% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand H&K better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with H&K , and understanding them should be part of your investment process.

We will like H&K better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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