When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term Hub Group, Inc. (NASDAQ:HUBG) shareholders would be well aware of this, since the stock is up 112% in five years. And in the last month, the share price has gained 16%. We note that Hub Group reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.
Since the stock has added US$331m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
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, Hub Group achieved compound earnings per share (EPS) growth of 28% per year. This EPS growth is higher than the 16% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 10.92 also suggests market apprehension.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Hub Group has grown profits over the years, but the future is more important for shareholders. This free interactive report on Hub Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Hub Group has rewarded shareholders with a total shareholder return of 9.2% in the last twelve months. Having said that, the five-year TSR of 16% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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 instance, we've identified 1 warning sign for Hub Group that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.