Houlihan Lokey's (NYSE:HLI) five-year total shareholder returns outpace the underlying earnings growth

Houlihan Lokey, Inc. (NYSE:HLI) shareholders might be concerned after seeing the share price drop 11% in the last month. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 96% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 14% decline over the last twelve months.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Houlihan Lokey

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Houlihan Lokey managed to grow its earnings per share at 19% a year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Houlihan Lokey the TSR over the last 5 years was 120%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Although it hurts that Houlihan Lokey returned a loss of 12% in the last twelve months, the broader market was actually worse, returning a loss of 22%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 17% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Houlihan Lokey that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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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.