L3Harris Technologies Shareholders Have Earned 9.6% CAGR Over Last Five Years – Simply Wall St
Stock Analysis
Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term L3Harris Technologies, Inc. (NYSE:LHX) shareholders have enjoyed a 45% share price rise over the last half decade, well in excess of the market return of around 38% (not including dividends).
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for L3Harris Technologies
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, L3Harris Technologies managed to grow its earnings per share at 1.9% a year. This EPS growth is lower than the 8% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, L3Harris Technologies' TSR for the last 5 years was 58%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
While it's certainly disappointing to see that L3Harris Technologies shares lost 0.9% throughout the year, that wasn't as bad as the market loss of 23%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 10% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. For instance, we've identified 1 warning sign for L3Harris Technologies that you should be aware of.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
What are the risks and opportunities for L3Harris Technologies?
NYSE:LHX
L3Harris Technologies
L3Harris Technologies, Inc., an aerospace and defense technology company, provides mission-critical solutions for government and commercial customers worldwide.
Rewards
Trading at 25.2% below our estimate of its fair value
Earnings are forecast to grow 19.22% per year
Risks
Large one-off items impacting financial results
Share Price
Market Cap
1Y Return
Further research on
L3Harris Technologies
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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.
L3Harris Technologies, Inc., an aerospace and defense technology company, provides mission-critical solutions for government and commercial customers worldwide.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
Read more about these checks in the individual report sections or in our analysis model.
Excellent balance sheet established dividend payer.
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