If You Had Bought Hiscox (LON:HSX) Stock Five Years Ago, You Could Pocket A 123% Gain Today
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Hiscox Ltd (LON:HSX) shareholders would be well aware of this, since the stock is up 123% in five years. It's down 1.3% in the last seven days.
View our latest analysis for Hiscox
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.
During five years of share price growth, Hiscox actually saw its EPS drop 18% per year. This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
In contrast revenue growth of 5.3% per year is probably viewed as evidence that Hiscox is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Hiscox in this interactive graph of future profit estimates.
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, Hiscox's TSR for the last 5 years was 170%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Hiscox shareholders are up 0.2% for the year (even including dividends) . Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 22% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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.
Hiscox is not the only stock that insiders are buying. 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 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 editorial-team@simplywallst.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.
