Yahoo Finance Investing in H&E Equipment Services (NASDAQ:HEES) three years ago would have delivered you a 45% gain
Thanks in no small measure to Vanguard founder Jack Bogle, it's easy buy a low cost index fund, which should provide the average market return. But you can make better returns by buying undervalued shares. Notably, the H&E Equipment Services, Inc. (NASDAQ:HEES) share price has gained 30% in three years, which is better than the average market return. Zooming in, the stock is up just 1.6% in the last year.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for H&E Equipment Services
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. 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 three years of share price growth, H&E Equipment Services achieved compound earnings per share growth of 5.0% per year. This EPS growth is lower than the 9% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. That's not necessarily surprising considering the three-year track record of earnings growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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. This free interactive report on H&E Equipment Services' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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, H&E Equipment Services' TSR for the last 3 years was 45%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that H&E Equipment Services has rewarded shareholders with a total shareholder return of 4.6% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 7% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with H&E Equipment Services , and understanding them should be part of your investment process.
H&E Equipment Services is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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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