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The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Fagron NV (EBR:FAGR) share price has soared 199% in the last three years. Most would be happy with that. It’s also good to see the share price up 13% over the last quarter. But this could be related to the strong market, which is up 14% in the last three months.
View our latest analysis for Fagron
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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 three years of share price growth, Fagron moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Fagron has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Fagron stock, you should check out this FREE detailed report on its balance sheet.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Fagron’s TSR for the last 3 years was 223%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We’re pleased to report that Fagron shareholders have received a total shareholder return of 24% over one year. That’s including the dividend. Notably the five-year annualised TSR loss of 15% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Is Fagron cheap compared to other companies? These 3 valuation measures might help you decide.