The one-year decline in earnings for Huntington Ingalls Industries NYSE:HII) isn't encouraging, but shareholders are still up 31% over that period
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the Huntington Ingalls Industries, Inc. (NYSE:HII) share price is up 28% in the last 1 year, clearly besting the market decline of around 26% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 2.5% lower than it was three years ago.
Although Huntington Ingalls Industries has shed US$376m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
View our latest analysis for Huntington Ingalls Industries
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over the last twelve months, Huntington Ingalls Industries actually shrank its EPS by 21%.
Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We doubt the modest 1.9% dividend yield is doing much to support the share price. However the year on year revenue growth of 7.0% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Huntington Ingalls Industries in this interactive graph of future profit estimates.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Huntington Ingalls Industries the TSR over the last 1 year was 31%, 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
It's good to see that Huntington Ingalls Industries has rewarded shareholders with a total shareholder return of 31% in the last twelve months. That's including the dividend. That's better than the annualised return of 2% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Huntington Ingalls Industries better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Huntington Ingalls Industries you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.
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