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It’s easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) share price is down 32% in the last year. That’s disappointing when you consider the market returned 2.7%. Longer term investors have fared much better, since the share price is up 12% in three years. Furthermore, it’s down 16% in about a quarter. That’s not much fun for holders.
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.
Unfortunately J.B. Hunt Transport Services reported an EPS drop of 30% for the last year. This proportional reduction in earnings per share isn’t far from the 32% decrease in the share price. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn’t seemed to have happened. Rather, the share price has approximately tracked EPS growth.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between J.B. Hunt Transport Services’s total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that J.B. Hunt Transport Services’s TSR, which was a 32% drop over the last year, was not as bad as the share price return.
A Different Perspective
Investors in J.B. Hunt Transport Services had a tough year, with a total loss of 32% (including dividends), against a market gain of about 2.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 4.2%, each year, over five years. 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. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies 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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.