The total return for H&E Equipment Services (NASDAQ:HEES) investors has risen faster than earnings growth over the last five years

Simply Wall St
May 25, 2022
Source: Shutterstock

It might be of some concern to shareholders to see the H&E Equipment Services, Inc. (NASDAQ:HEES) share price down 14% in the last month. But at least the stock is up over the last five years. In that time, it is up 66%, which isn't bad, but is below the market return of 75%.

Although H&E Equipment Services has shed US$71m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for H&E Equipment Services

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the last half decade, H&E Equipment Services became profitable. That would generally be considered a positive, so we'd expect the share price to be up.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NasdaqGS:HEES Earnings Per Share Growth May 25th 2022

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of H&E Equipment Services' earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, H&E Equipment Services' TSR for the last 5 years was 103%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While it's never nice to take a loss, H&E Equipment Services shareholders can take comfort that , including dividends,their trailing twelve month loss of 4.2% wasn't as bad as the market loss of around 12%. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand H&E Equipment Services better, we need to consider many other factors. For instance, we've identified 3 warning signs for H&E Equipment Services (1 is a bit concerning) that you should be aware of.

H&E Equipment Services is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.