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It's possible to achieve returns close to the market-weighted average return by buying an index fund. A talented investor can beat the market with a diversified portfolio, but even then, some stocks will under-perform The Hansteen Holdings PLC (LON:HSTN) is down 11% over five years, but the total shareholder return is 59% once you include the dividend. And that total return actually beats the market return of 30%. The silver lining is that the stock is up 3.9% in about a week.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
While the share price declined over five years, Hansteen Holdings actually managed to increase EPS by an average of 9.7% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS. It is unusual to see such modest share price growth in the face of sustained EPS improvements. We can look to other metrics to try to understand the situation better.
The steady dividend doesn't really explain why the share price is down. However, revenue has declined at a compound annual rate of 15% per year. With revenue weak, and increased payouts of cash, the market might be taking the view that its best days are behind it.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Hansteen Holdings will earn in the future (free profit forecasts).
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Hansteen Holdings's TSR for the last 5 years was 59%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Hansteen Holdings's TSR for the year was broadly in line with the market average, at 2.5%. It has to be noted that the recent return falls short of the 9.8% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Hansteen Holdings a stock worth watching. 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.
Hansteen Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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 email@example.com. 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.