By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, the HV Bancorp, Inc. (NASDAQ:HVBC) share price is up 75% in the last three years, clearly besting the market return of around 20% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 17%.
The past week has proven to be lucrative for HV Bancorp investors, so let's see if fundamentals drove the company's three-year performance.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).
HV Bancorp was able to grow its EPS at 41% per year over three years, sending the share price higher. The average annual share price increase of 20% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of HV Bancorp's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that HV Bancorp shareholders have received a total shareholder return of 17% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Even so, be aware that HV Bancorp is showing 4 warning signs in our investment analysis , you should know about...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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