Investors in Hewlett Packard Enterprise (NYSE:HPE) have made a return of 23% over the past five years

By
Simply Wall St
Published
November 20, 2021
NYSE:HPE
Source: Shutterstock

For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Hewlett Packard Enterprise Company (NYSE:HPE), since the last five years saw the share price fall 38%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Hewlett Packard Enterprise

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the five years over which the share price declined, Hewlett Packard Enterprise's earnings per share (EPS) dropped by 21% each year. The share price decline of 9% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.

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

earnings-per-share-growth
NYSE:HPE Earnings Per Share Growth November 21st 2021

We know that Hewlett Packard Enterprise 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?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Hewlett Packard Enterprise, it has a TSR of 23% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Hewlett Packard Enterprise shareholders have received a total shareholder return of 42% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 3 warning signs for Hewlett Packard Enterprise 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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