Investing in H&R Block (NYSE:HRB) five years ago would have delivered you a 185% gain

It hasn't been the best quarter for H&R Block, Inc. (NYSE:HRB) shareholders, since the share price has fallen 15% in that time. But that scarcely detracts from the really solid long term returns generated by the company over five years. It's fair to say most would be happy with 134% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for H&R Block

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 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).

Over half a decade, H&R Block managed to grow its earnings per share at 15% a year. This EPS growth is lower than the 19% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that H&R Block has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, H&R Block's TSR for the last 5 years was 185%, 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

H&R Block shareholders are up 17% for the year (even including dividends). But that return falls short of the market. On the bright side, the longer term returns (running at about 23% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Take risks, for example - H&R Block has 2 warning signs we think you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.