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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. For instance the LHN Limited (Catalist:41O) share price is 264% higher than it was three years ago. Most would be happy with that. It's also good to see the share price up 43% over the last quarter.
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 LHN
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).
LHN was able to grow its EPS at 52% per year over three years, sending the share price higher. Notably, the 54% average annual share price gain matches up nicely with the EPS growth rate. This observation indicates that the market's attitude to the business hasn't changed all that much. Au contraire, the share price change has arguably mimicked the EPS growth.
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 LHN has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling LHN 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. We note that for LHN the TSR over the last 3 years was 341%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that LHN has rewarded shareholders with a total shareholder return of 52% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 20% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - LHN has 3 warning signs we think you should be aware of.