Despite shrinking by US$56m in the past week, Heritage Insurance Holdings (NYSE:HRTG) shareholders are still up 773% over 3 years

Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. You won't get it right every time, but when you do, the returns can be truly splendid. Take, for example, the Heritage Insurance Holdings, Inc. (NYSE:HRTG) share price, which skyrocketed 773% over three years. Also pleasing for shareholders was the 56% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 25% in 90 days). We love happy stories like this one. The company should be really proud of that performance!

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

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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 three years of share price growth, Heritage Insurance Holdings moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Heritage Insurance Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Heritage Insurance Holdings shareholders have received a total shareholder return of 244% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% 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. 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. To that end, you should be aware of the 1 warning sign we've spotted with Heritage Insurance Holdings .

Heritage Insurance Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.