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The total return for Huntsman (NYSE:HUN) investors has risen faster than earnings growth over the last three years
Huntsman Corporation (NYSE:HUN) shareholders have seen the share price descend 13% over the month. But that doesn't change the fact that the returns over the last three years have been pleasing. In the last three years the share price is up, 97%: better than the market.
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.
Check out our latest analysis for Huntsman
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Huntsman achieved compound earnings per share growth of 12% per year. This EPS growth is lower than the 25% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. 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). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Huntsman's TSR for the last 3 years was 115%, 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
We regret to report that Huntsman shareholders are down 29% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 7.3%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 0.2% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 Huntsman that you should be aware of.
Huntsman is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing 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 US exchanges.
What are the risks and opportunities for Huntsman?
Huntsman Corporation manufactures and sells diversified organic chemical products worldwide.
Rewards
Trading at 18.8% below our estimate of its fair value
Earnings are forecast to grow 13.76% per year
Risks
Profit margins (5.6%) are lower than last year (13%)
Further research on
Huntsman
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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.
About NYSE:HUN
Huntsman
Huntsman Corporation manufactures and sells diversified organic chemical products worldwide.
Flawless balance sheet established dividend payer.
