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Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Channel Infrastructure NZ Limited (NZSE:CHI) shares for the last five years, while they gained 453%. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 13% gain in the last three months.

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

Trump has pledged to “unleash” American oil and gas and these 15 US stocks have developments that are poised to benefit.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

During the five years of share price growth, Channel Infrastructure NZ moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. 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 Channel Infrastructure NZ share price is up 106% in the last three years. Meanwhile, EPS is up 77% per year. This EPS growth is higher than the 27% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Channel Infrastructure NZ has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Channel Infrastructure NZ the TSR over the last 5 years was 602%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

It’s nice to see that Channel Infrastructure NZ shareholders have received a total shareholder return of 60% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 48%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example – Channel Infrastructure NZ has 1 warning sign we think you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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

Theft of signalling cables has caused “major disruption” on parts of the train network, National Rail said.

The cables were stolen at Napsbury, resulting in a fault with the signalling system at St Albans, Hertfordshire.

National Rail said East Midlands Railway services between Sheffield, Nottingham, Corby and London St Pancras were affected as well as Thameslink services between Bedford and East Croydon, and also between Luton and Rainham, in Kent.

A spokeswoman said work to replace the cables was taking place overnight and normal services were expected to resume at about 06:00 GMT on Sunday.

The company said the theft resulted in “major disruption” meaning that “trains running between Luton and London St Pancras International may be cancelled, severely delayed by up to 60 minutes or revised”.

On National Rail’s website, East Midlands Railway advised customers to expect delays as “trains are being manually sent through the affected area”.

Thameslink also told customers to expect lengthy delays and more frequent train change.

Alternative arrangements for travel have been posted on the National Rail site.

Story Continues

What counts as a “normal” P/E depends on what investors expect for future growth and how much risk they see in those earnings. Higher expected growth and lower perceived risk usually support a higher P/E, while lower growth or higher risk tend to mean a lower P/E.

Hitachi is currently trading on a P/E of 29.52x. That sits above the Industrials sector average of 12.98x and also above the peer group average of 13.32x. To add more context, Simply Wall St calculates a proprietary “Fair Ratio” for Hitachi of 36.10x, which reflects factors such as earnings growth, industry, profit margins, market cap and risk profile.

This Fair Ratio aims to be more tailored than a simple comparison with peers or the sector, because it adjusts for company specific traits rather than assuming all firms should trade on the same multiple. Compared with this Fair Ratio, Hitachi’s current P/E of 29.52x is lower, which points to the shares being undervalued on this measure.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1445 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you turn your view of Hitachi into a clear story that links its business drivers to a forecast for revenue, earnings and margins, then to a Fair Value you can compare with the current price. All of this is updated as new news or earnings arrive. One investor might back a higher fair value around ¥5,300 if they think government backed energy and AI infrastructure and digital services can support stronger margins, while another might anchor closer to ¥3,900 if they are more cautious about competition, costs and underperforming segments.

Do you think there’s more to the story for Hitachi? Head over to our Community to see what others are saying!

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.

Companies discussed in this article include 6501.T.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com