Hays' (LON:HAS) earnings trajectory could turn positive as the stock ascends 4.9% this past week
Hays plc (LON:HAS) shareholders should be happy to see the share price up 12% in the last month. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 32% in that half decade.
The recent uptick of 4.9% could be a positive sign of things to come, so let's take a look at historical fundamentals.
Check out our latest analysis for Hays
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.
Looking back five years, both Hays' share price and EPS declined; the latter at a rate of 5.3% per year. This reduction in EPS is less than the 8% annual reduction in the share price. This implies that the market is more cautious about the business these days.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Hays has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Hays the TSR over the last 5 years was -11%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in Hays had a tough year, with a total loss of 7.0% (including dividends), against a market gain of about 1.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Hays is showing 1 warning sign in our investment analysis , you should know about...
But note: Hays may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
