Yahoo Finance Howmet Aerospace (NYSE:HWM) shareholder returns have been splendid, earning 119% in 3 years
Buying a low-cost index fund will get you the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. For example, the Howmet Aerospace Inc. (NYSE:HWM) share price return of 67% over three years lags the market return in the same period. Having said that, the 20% increase over the past year is good to see.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
View our latest analysis for Howmet Aerospace
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Howmet Aerospace became profitable within the last three years. So we would expect a higher share price over the period.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Howmet Aerospace has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Howmet Aerospace will grow revenue in the future.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Howmet Aerospace's TSR for the last 3 years was 119%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Howmet Aerospace provided a TSR of 20% over the last twelve months. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 16% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Howmet Aerospace has 2 warning signs (and 1 which is a bit concerning) we think you should know about.
Of course Howmet Aerospace 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.
