Hexagon (STO:HEXA B) jumps 4.6% this week, though earnings growth is still tracking behind five-year shareholder returns

Hexagon AB (publ) (STO:HEXA B) shareholders might be concerned after seeing the share price drop 10% in the last quarter. On the bright side the share price is up over the last half decade. However we are not very impressed because the share price is only up 74%, less than the market return of 84%.

The past week has proven to be lucrative for Hexagon investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Hexagon

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Over half a decade, Hexagon managed to grow its earnings per share at 2.6% a year. This EPS growth is lower than the 12% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Hexagon, it has a TSR of 83% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Hexagon shareholders are up 18% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 13% per year over five year. It is possible that returns will improve along with the business fundamentals. If you would like to research Hexagon in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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