Herc Holdings Inc. (NYSE:HRI) shareholders might be concerned after seeing the share price drop 20% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 210% in that time. To some, the recent pullback wouldn't be surprising after such a fast rise. Ultimately business performance will determine whether the stock price continues the positive long term trend.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Herc 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).

Over half a decade, Herc Holdings managed to grow its earnings per share at 7.3% a year. This EPS growth is lower than the 25% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Herc Holdings has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Herc Holdings stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Herc Holdings, it has a TSR of 221% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 13% in the last year, Herc Holdings shareholders lost 7.6% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 26% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 3 warning signs for Herc Holdings you should be aware of.

Of course Herc Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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.