Should Hyster-Yale Materials Handling (NYSE:HY) Be Disappointed With Their 94% Profit?

By
Simply Wall St
Published
March 02, 2021
NYSE:HY
Source: Shutterstock

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Hyster-Yale Materials Handling, Inc. (NYSE:HY) share price is up 94% in the last year, clearly besting the market return of around 37% (not including dividends). So that should have shareholders smiling. However, the longer term returns haven't been so impressive, with the stock up just 30% in the last three years.

Check out our latest analysis for Hyster-Yale Materials Handling

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 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).

During the last year Hyster-Yale Materials Handling grew its earnings per share (EPS) by 2.5%. This EPS growth is significantly lower than the 94% increase in the share price. This indicates that the market is now more optimistic about the stock.

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

earnings-per-share-growth
NYSE:HY Earnings Per Share Growth March 3rd 2021

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Hyster-Yale Materials Handling, it has a TSR of 99% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Hyster-Yale Materials Handling has rewarded shareholders with a total shareholder return of 99% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 4 warning signs for Hyster-Yale Materials Handling that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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