Hawesko Holding SE (ETR:HAW) shareholders should be happy to see the share price up 17% in the last quarter. But that doesn’t change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 41% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
On a more encouraging note the company has added €32m to its market cap in just the last 7 days, so let’s see if we can determine what’s driven the three-year loss for shareholders.
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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
During the three years that the share price fell, Hawesko Holding’s earnings per share (EPS) dropped by 27% each year. This fall in the EPS is worse than the 16% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Hawesko Holding has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Hawesko Holding the TSR over the last 3 years was -33%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
Hawesko Holding shareholders are down 3.4% for the year (even including dividends), but the market itself is up 20%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 0.7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Hawesko Holding better, we need to consider many other factors. Case in point: We’ve spotted 1 warning sign for Hawesko Holding you should be aware of.
Of course Hawesko Holding 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 German 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.