Is Home Capital Group's (TSE:HCG) 119% Share Price Increase Well Justified?
When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right stock, you can make a lot more than 100%. For example, the Home Capital Group Inc. (TSE:HCG) share price had more than doubled in just one year - up 119%. It's also good to see the share price up 31% over the last quarter. However, the stock hasn't done so well in the longer term, with the stock only up 7.8% in three years.
See our latest analysis for Home Capital Group
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Home Capital Group was able to grow EPS by 32% in the last twelve months. The share price gain of 119% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Home Capital Group's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Home Capital Group's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Home Capital Group shareholders, and that cash payout contributed to why its TSR of 119%, over the last year, is better than the share price return.
A Different Perspective
It's good to see that Home Capital Group has rewarded shareholders with a total shareholder return of 119% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 5.6% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Home Capital Group by clicking this link.
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 CA 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.
