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Active investing isn't easy, but for those that do it, the aim is to find the best companies to buy, and to profit handsomely. When an investor finds a multi-bagger (a stock that goes up over 200%), it makes a big difference to their portfolio. For example, the Dillard's, Inc. (NYSE:DDS) share price is up a whopping 528% in the last year, a handsome return in a single year. Also pleasing for shareholders was the 65% gain in the last three months. Also impressive, the stock is up 104% over three years, making long term shareholders happy, too.
We love happy stories like this one. The company should be really proud of that performance!
View our latest analysis for Dillard's
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last year Dillard's grew its earnings per share, moving from a loss to a profit.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
We are skeptical of the suggestion that the 0.3% dividend yield would entice buyers to the stock. Dillard's' revenue actually dropped 12% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Dillard's stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Dillard's' TSR for the last year was 534%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!