WH Group's three-year total shareholder returns outpace the underlying earnings growth


By Simply Wall St

September 07, 2021


WH Group Limited shareholders might be concerned after seeing the share price drop 16% in the last quarter. In contrast the stock is up over the last three years. Arguably you'd have been better off buying an index fund, because the gain of 13% in three years isn't amazing.


Since the long term performance has been good but there's been a recent pullback of 9.3%, let's check if the fundamentals match the share price.


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...' 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.


WH Group was able to grow its EPS at 2.9% per year over three years, sending the share price higher. In comparison, the 4% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress.


Before buying or selling a stock, we always recommend a close examination of historic growth trends.


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