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The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Huntington Ingalls Industries, Inc. (NYSE:HII) has fallen short of that second goal, with a share price rise of 49% over five years, which is below the market return. Zooming in, the stock is up a respectable 7.2% in the last year.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, Huntington Ingalls Industries achieved compound earnings per share (EPS) growth of 15% per year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So it seems the market isn't so enthusiastic about the stock these days.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Huntington Ingalls Industries has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Huntington Ingalls Industries' TSR for the last 5 years was 62%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Huntington Ingalls Industries provided a TSR of 9.8% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 10% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Huntington Ingalls Industries better, we need to consider many other factors. For instance, we've identified 3 warning signs for Huntington Ingalls Industries 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.
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. 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.
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