When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. But Hudson Pacific Properties, Inc. (NYSE:HPP) has fallen short of that second goal, with a share price rise of 33% over five years, which is below the market return. The last year hasn't been great either, with the stock up just 2.9%.
We don't think that Hudson Pacific Properties's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
For the last half decade, Hudson Pacific Properties can boast revenue growth at a rate of 20% per year. That's well above most pre-profit companies. While long-term shareholders have made money, the 5.8% per year gain over five years fall short of the market return. You could argue the market is still pretty skeptical, given the growing revenues. It could be that the stock was previously over-priced - but if you're looking for underappreciated growth stocks, these numbers indicate that there might be an opportunity here.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Hudson Pacific Properties, it has a TSR of 51% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Hudson Pacific Properties has rewarded shareholders with a total shareholder return of 6.1% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 8.6% per year, is even more impressive. 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.
Hudson Pacific Properties 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 US exchanges.
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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.