In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Heartland Group Holdings Limited (NZSE:HGH) shareholders, since the share price is down 34% in the last three years, falling well short of the market return of around 38%. The more recent news is of little comfort, with the share price down 28% in a year. It's down 38% in about a quarter.
View our latest analysis for Heartland Group Holdings
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 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).
Although the share price is down over three years, Heartland Group Holdings actually managed to grow EPS by 0.1% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. But it's possible a look at other metrics will be enlightening.
Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Heartland Group Holdings has actually grown its revenue over the last three years. If the company can keep growing revenue, there may be an opportunity for investors. You might have to dig deeper to understand the recent share price weakness.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Heartland Group Holdings has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Heartland Group Holdings in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Heartland Group Holdings the TSR over the last 3 years was -19%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in Heartland Group Holdings had a tough year, with a total loss of 22% (including dividends) , against a market gain of about 3.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 4.5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Heartland Group Holdings better, we need to consider many other factors. For example, we've discovered 3 warning signs for Heartland Group Holdings that you should be aware of before investing here.
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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 NZ exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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. Thank you for reading.