The main point of investing for the long term is to make money. Furthermore, you’d generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the First Hawaiian, Inc. (NASDAQ:FHB) share price is up 41% in the last five years, that’s less than the market return. Meanwhile, the last twelve months saw the share price rise 3.5%.
Although First Hawaiian has shed US$173m from its market cap this week, let’s take a look at its longer term fundamental trends and see if they’ve driven returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
First Hawaiian’s earnings per share are down 0.5% per year, despite strong share price performance over five years.
So it’s hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it’s worth taking a look at other metrics to try to understand the share price movements.
We note that the dividend has not increased, so that doesn’t seem to explain the increase, either. But it’s reasonably likely that the 4.9% annual compound revenue growth is considered evidence that First Hawaiian has plenty of growth ahead of it. In that case, the company may be sacrificing current earnings per share to drive growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on First Hawaiian’s balance sheet strength is a great place to start, if you want to investigate the stock further.
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of First Hawaiian, it has a TSR of 76% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
