Yahoo Finance James Hardie Industries' (ASX:JHX) earnings growth rate lags the 25% CAGR delivered to shareholders
It hasn't been the best quarter for James Hardie Industries plc (ASX:JHX) shareholders, since the share price has fallen 18% in that time. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. After all, the share price is up a market-beating 87% in that time.
Since the long term performance has been good but there's been a recent pullback of 4.7%, let's check if the fundamentals match the share price.
See our latest analysis for James Hardie Industries
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.
James Hardie Industries was able to grow its EPS at 26% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 23% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Quite to the contrary, the share price has arguably reflected the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for James Hardie Industries the TSR over the last 3 years was 97%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in James Hardie Industries had a tough year, with a total loss of 18% (including dividends), against a market gain of about 3.7%. 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 14%, 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 James Hardie Industries better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for James Hardie Industries you should be aware of.
We will like James Hardie Industries better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
