Investors one-year returns in Huntington Ingalls Industries (NYSE:HII) have not grown faster than the company's underlying earnings growth

Huntington Ingalls Industries, Inc. (NYSE:HII) shareholders might be concerned after seeing the share price drop 15% in the last quarter. Looking on the brighter side, the stock is actually up over twelve months. But to be blunt its return of 13% fall short of what you could have got from an index fund (around 24%).

While the stock has fallen 3.3% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Huntington Ingalls Industries

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 year Huntington Ingalls Industries grew its earnings per share (EPS) by 25%. This EPS growth is significantly higher than the 13% increase in the share price. So it seems like the market has cooled on Huntington Ingalls Industries, despite the growth. Interesting.

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

We know that Huntington Ingalls Industries has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Huntington Ingalls Industries, it has a TSR of 15% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Huntington Ingalls Industries provided a TSR of 15% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 4% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Huntington Ingalls Industries that you should be aware of.

For those who like to find winning investments this free list of undervalued 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 American 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.