Those who invested in Employers Holdings (NYSE:EIG) a year ago are up 23%
There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the Employers Holdings, Inc. (NYSE:EIG) share price is up 20% in the last year, that falls short of the market return. The longer term returns have not been as good, with the stock price only 3.4% higher than it was three years ago.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Employers Holdings
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
During the last year Employers Holdings grew its earnings per share (EPS) by 74%. This EPS growth is significantly higher than the 20% increase in the share price. So it seems like the market has cooled on Employers Holdings, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.92.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Employers Holdings has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Employers Holdings the TSR over the last 1 year was 23%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Employers Holdings shareholders have received returns of 23% over twelve months (even including dividends), which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 3%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Employers Holdings is showing 1 warning sign in our investment analysis , you should know about...
We will like Employers Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 American 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com