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It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the EKF Diagnostics Holdings plc (LON:EKF) share price has soared 187% in the last three years. That sort of return is as solid as granite. Then again, the 9.9% share price decline hasn't been so fun for shareholders.
Check out our latest analysis for EKF Diagnostics Holdings
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
EKF Diagnostics Holdings became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how EKF Diagnostics Holdings has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling EKF Diagnostics Holdings stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between EKF Diagnostics Holdings's total shareholder return (TSR) and its share price change, which we've covered above. 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. We note that EKF Diagnostics Holdings's TSR, at 251% is higher than its share price return of 187%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
We're pleased to report that EKF Diagnostics Holdings shareholders have received a total shareholder return of 21% over one year. That gain is better than the annual TSR over five years, which is 8.3%. 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. 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.