Investors in Hewlett Packard Enterprise (NYSE:HPE) have made a return of 25% over the past five years
Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Hewlett Packard Enterprise Company (NYSE:HPE) shareholders for doubting their decision to hold, with the stock down 17% over a half decade.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Hewlett Packard Enterprise
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Hewlett Packard Enterprise became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
The revenue fall of 1.1% per year for five years is neither good nor terrible. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Hewlett Packard Enterprise is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Hewlett Packard Enterprise the TSR over the last 5 years was 25%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Although it hurts that Hewlett Packard Enterprise returned a loss of 1.8% in the last twelve months, the broader market was actually worse, returning a loss of 8.4%. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand Hewlett Packard Enterprise better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Hewlett Packard Enterprise (including 1 which doesn't sit too well with us) .
Of course Hewlett Packard Enterprise may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
