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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For example, the Netcall plc (LON:NET) share price has soared 184% in the last three years. Most would be happy with that. In the last week shares have slid back 3.7%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Netcall
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years of share price growth, Netcall achieved compound earnings per share growth of 103% per year. This EPS growth is higher than the 42% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. Of course, with a P/E ratio of 50.03, the market remains optimistic.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Netcall has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Netcall's financial health with this free 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. 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. We note that for Netcall the TSR over the last 3 years was 188%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Netcall shareholders have received a total shareholder return of 25% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Netcall that you should be aware of.