New Hope (ASX: NHC) Shareholders Still Up 116% YoY Despite Down 3.9% Last Week
When you buy shares in a company, there is always a risk that the price will drop to zero. On the flip side, if you find a high quality business to buy (at the right price), you can more than double your money! For example, the New Hope Corporation Limited (ASX: NHC) the stock price has climbed 110% in a single year. On top of that, the share price rose 35% in about a quarter. The company recently released its financial results; you can keep up to date with the latest figures by reading our company report. Unfortunately, long-term returns aren’t that good, with the stock falling 31% in the past three years.
While the past week has hurt the company’s year-over-year performance, let’s take a look at recent trends in underlying activity and see if the gains have been aligned.
See our latest analysis for New Hope
In his essay Graham-and-Doddsville super-investors Warren Buffett described how stock prices don’t always rationally reflect a company’s value. By comparing earnings per share (EPS) and changes in the share price over time, we can get a sense of how investors’ attitudes towards a company have changed over time.
New Hope has gone from loss to profit over the past year.
When a company is right on the brink of profitability, it may be useful to consider other metrics to more accurately assess growth (and therefore understand stock price movements).
We note that the most recent dividend payout is higher than the payout a year ago, which may have helped the stock price. Income-seeking investors likely helped the share price rise.
The graph below illustrates the evolution of earnings and income over time (reveal the exact values ââby clicking on the image).
We know New Hope has improved its results lately, but what does the future hold? If you are thinking of buying or selling New Hope stock, you should check this out free report showing analysts’ earnings forecasts.
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 incorporates the value of any discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. It’s fair to say that the TSR gives a more complete picture of dividend paying stocks. As it turns out, New Hope’s TSR for the past year was 116%, which exceeds the share price return mentioned earlier. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
We are pleased to report that New Hope shareholders achieved a 116% year-on-year total shareholder return. And that includes the dividend. As the 1-year TSR is better than the 5-year TSR (the latter standing at 10% per year), it seems that the stock’s performance has improved in recent times. At the best of times, this can portend real business momentum, meaning that now may be a good time to dig deep. I find it very interesting to look at the long-term share price as an indicator of company performance. But to really get an overview, we have to take other information into account as well. Consider, for example, the ever-present specter of investment risk. We have identified 4 warning signs with New Hope (at least 1 which is a bit obnoxious), and understanding them should be part of your investment process.
We’ll like New Hope better if we see big insider buys. In the meantime, watch this free list of growing companies with significant and recent insider buying.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on AU stock exchanges.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.