The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Huntsman Corporation (NYSE:HUN) which saw its share price drive 108% higher over five years.
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. 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.
During five years of share price growth, Huntsman achieved compound earnings per share (EPS) growth of 25% per year. The EPS growth is more impressive than the yearly share price gain of 16% over the same period. So it seems the market isn't so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Huntsman has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Huntsman will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Huntsman's TSR for the last 5 years was 137%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Huntsman's TSR for the year was broadly in line with the market average, at 52%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 19% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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. For example, we've discovered 3 warning signs for Huntsman (1 can't be ignored!) that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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