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L3Harris Technologies' (NYSE:LHX) five-year earnings growth trails the strong shareholder returns

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When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the L3Harris Technologies, Inc. (NYSE:LHX) share price has soared 115% in the last half decade. Most would be very happy with that. Better yet, the share price has risen 3.6% in the last week. But this might be partly because the broader market had a good week last week, gaining 1.6%.

Since it's been a strong week for L3Harris Technologies shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for L3Harris Technologies

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, L3Harris Technologies achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is reasonably close to the 16% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

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

earnings-per-share-growth
earnings-per-share-growth

We know that L3Harris Technologies has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for L3Harris Technologies the TSR over the last 5 years was 134%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that L3Harris Technologies has rewarded shareholders with a total shareholder return of 12% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 19% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Before spending more time on L3Harris Technologies it might be wise to click here to see if insiders have been buying or selling shares.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

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.

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