Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. To wit, the HCI Group, Inc. (NYSE:HCI) share price has soared 343% over five years. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 33% over the last quarter.
Since the long term performance has been good but there's been a recent pullback of 6.6%, let's check if the fundamentals match the share price.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the five years of share price growth, HCI Group moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that HCI Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of HCI Group, it has a TSR of 423% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that HCI Group shareholders have received a total shareholder return of 170% over the last year. And that does include the dividend. That's better than the annualised return of 39% 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. 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. Case in point: We've spotted 5 warning signs for HCI Group you should be aware of, and 2 of them don't sit too well with us.
Of course HCI Group 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.
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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