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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For example, the Fisher & Paykel Healthcare Corporation Limited (NZSE:FPH) share price has soared 219% in the last half decade. Most would be very happy with that. In the last week the share price is up 3.9%.
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, Fisher & Paykel Healthcare managed to grow its earnings per share at 29% a year. So the EPS growth rate is rather close to the annualized share price gain of 26% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Fisher & Paykel Healthcare has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Fisher & Paykel Healthcare stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Fisher & Paykel Healthcare the TSR over the last 5 years was 248%, 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
Fisher & Paykel Healthcare provided a TSR of 5.8% over the last twelve months. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 28% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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.
We will like Fisher & Paykel Healthcare better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ 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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