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If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Dream Unlimited Corp. (TSE:DRM) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 59% drop in the share price over that period. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).
Dream Unlimited became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.
We note that, in three years, revenue has actually grown at a 24% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Dream Unlimited more closely, as sometimes stocks fall unfairly. This could present an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that Dream Unlimited has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Dream Unlimited in this interactive graph of future profit estimates.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Dream Unlimited, it has a TSR of -53% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!