Is First Horizon's (NYSE:FHN) Share Price Gain Of 104% Well Earned?
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example First Horizon Corporation (NYSE:FHN). Its share price is already up an impressive 104% in the last twelve months. It's also good to see the share price up 18% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Having said that, the longer term returns aren't so impressive, with stock gaining just 2.5% in three years.
See our latest analysis for First Horizon
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
First Horizon was able to grow EPS by 89% in the last twelve months. This EPS growth is reasonably close to the 104% increase in the share price. This makes us think the market hasn't really changed its sentiment around the company, in the last year. It looks like the share price is responding to the EPS.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of First Horizon's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, First Horizon's TSR for the last year 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
It's nice to see that First Horizon shareholders have received a total shareholder return of 115% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 9%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand First Horizon better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with First Horizon (including 2 which don't sit too well with us) .
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.
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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