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Announcing: Dechra Pharmaceuticals (LON:DPH) Stock Increased An Energizing 287% In The Last Five Years

Simply Wall St

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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. One great example is Dechra Pharmaceuticals PLC (LON:DPH) which saw its share price drive 287% higher over five years.

See our latest analysis for Dechra Pharmaceuticals

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Dechra Pharmaceuticals achieved compound earnings per share (EPS) growth of 8.4% per year. This EPS growth is lower than the 31% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 112.08.

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

LSE:DPH Past and Future Earnings, June 3rd 2019

This free interactive report on Dechra Pharmaceuticals's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. We note that for Dechra Pharmaceuticals the TSR over the last 5 years was 316%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that Dechra Pharmaceuticals shares lost 1.1% throughout the year, that wasn't as bad as the market loss of 2.0%. Longer term investors wouldn't be so upset, since they would have made 33%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

But note: Dechra Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.