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Is Hill & Smith Holdings's (LON:HILS) 159% Share Price Increase Well Justified?

Simply Wall St

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term Hill & Smith Holdings PLC (LON:HILS) shareholders would be well aware of this, since the stock is up 159% in five years. On top of that, the share price is up 11% in about a quarter. But this could be related to the strong market, which is up 5.4% in the last three months.

View our latest analysis for Hill & Smith Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

During five years of share price growth, Hill & Smith Holdings achieved compound earnings per share (EPS) growth of 17% per year. So the EPS growth rate is rather close to the annualized share price gain of 21% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

LSE:HILS Past and Future Earnings, February 20th 2020

This free interactive report on Hill & Smith Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Hill & Smith Holdings's TSR for the last 5 years was 191%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Hill & Smith Holdings shareholders have received a total shareholder return of 30% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 24%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Hill & Smith Holdings .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

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.

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. Thank you for reading.