Herc Holdings' (NYSE:HRI) five-year earnings growth trails the incredible shareholder returns
For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Herc Holdings Inc. (NYSE:HRI) share price. It's 312% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. We note the stock price is up 4.7% in the last seven days.
Since it's been a strong week for Herc Holdings shareholders, let's have a look at trend of the longer term fundamentals.
View our latest analysis for Herc Holdings
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.
Over half a decade, Herc Holdings managed to grow its earnings per share at 38% a year. This EPS growth is reasonably close to the 33% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Herc Holdings has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Herc Holdings stock, you should check out this FREE detailed report on its balance sheet.
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, Herc Holdings' TSR for the last 5 years was 331%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Herc Holdings has rewarded shareholders with a total shareholder return of 55% in the last twelve months. That's including the dividend. That's better than the annualised return of 34% over half a decade, implying that the company is doing better recently. 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 Herc Holdings better, we need to consider many other factors. Even so, be aware that Herc Holdings is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
