Yahoo Finance Dechra Pharmaceuticals (LON:DPH) Has Gifted Shareholders With A Fantastic 236% Total Return On Their Investment
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, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Dechra Pharmaceuticals PLC (LON:DPH) share price has soared 215% in the last half decade. Most would be very happy with that. It's also good to see the share price up 11% over the last quarter.
View 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.
Over half a decade, Dechra Pharmaceuticals managed to grow its earnings per share at 2.0% a year. This EPS growth is lower than the 26% 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. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 110.86.
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 Dechra Pharmaceuticals has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Dechra Pharmaceuticals' financial health with this free report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Dechra Pharmaceuticals, it has a TSR of 236% 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
We're pleased to report that Dechra Pharmaceuticals shareholders have received a total shareholder return of 6.0% over one year. That's including the dividend. However, the TSR over five years, coming in at 27% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Dechra Pharmaceuticals better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Dechra Pharmaceuticals .
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.
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. 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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