Yahoo Finance Those who invested in Hillenbrand (NYSE:HI) three years ago are up 39%
By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Hillenbrand, Inc. (NYSE:HI) share price is up 30% in the last three years, clearly besting the market return of around 20% (not including dividends).
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Hillenbrand
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Hillenbrand was able to grow its EPS at 9.9% per year over three years, sending the share price higher. We note that the 9% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This observation indicates that the market's attitude to the business hasn't changed all that much. Au contraire, the share price change has arguably mimicked the EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Hillenbrand's earnings, revenue and cash flow.
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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Hillenbrand's TSR for the last 3 years was 39%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's never nice to take a loss, Hillenbrand shareholders can take comfort that , including dividends,their trailing twelve month loss of 12% wasn't as bad as the market loss of around 22%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 2% for each year. 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 Hillenbrand better, we need to consider many other factors. For instance, we've identified 1 warning sign for Hillenbrand that you should be aware of.
Hillenbrand is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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