Investors in Headwater Exploration (TSE:HWX) have seen massive returns of 531% over the past five years

Yahoo

15 hours ago

Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the Headwater Exploration Inc. (TSE:HWX) share price. It's 433% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 28% over the last quarter. But this could be related to the strong market, which is up 16% in the last three months.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the five years of share price growth, Headwater Exploration moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Headwater Exploration share price is up 22% in the last three years. During the same period, EPS grew by 20% each year. This EPS growth is higher than the 7% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 7.96.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Headwater Exploration's earnings, revenue and cash flow.
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. We note that for Headwater Exploration the TSR over the last 5 years was 531%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
Investors in Headwater Exploration had a tough year, with a total loss of 1.7% (including dividends), against a market gain of about 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 45%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Headwater Exploration better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Headwater Exploration you should be aware of, and 1 of them can't be ignored.
Headwater Exploration is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
—
Investing narratives with Fair Values
Suncorp's Next Chapter: Insurance-Only and Ready to Grow By Robbo – Community Contributor
Fair Value Estimated: A$22.83 · 0.1% Overvalued
Thyssenkrupp Nucera Will Achieve Double-Digit Profits by 2030 Boosted by Hydrogen Growth By Chris1 – Community Contributor
Fair Value Estimated: €14.40 · 0.3% Overvalued
Tesla's Nvidia Moment – The AI & Robotics Inflection Point By BlackGoat – Community Contributor
Fair Value Estimated: $359.72 · 0.1% Overvalued
View more featured narratives
—
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
登入存取你的投資組合