Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, the Duopharma Biotech Berhad (KLSE:DPHARMA) share price is up 75% in the last 5 years, clearly besting the market decline of around 19% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 0.9% , including dividends .
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Duopharma Biotech Berhad
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).
Over half a decade, Duopharma Biotech Berhad managed to grow its earnings per share at 9.8% a year. So the EPS growth rate is rather close to the annualized share price gain of 12% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Duopharma Biotech Berhad's key metrics by checking this interactive graph of Duopharma Biotech Berhad's earnings, revenue and cash flow.
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 Duopharma Biotech Berhad the TSR over the last 5 years was 102%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Duopharma Biotech Berhad has rewarded shareholders with a total shareholder return of 0.9% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 15% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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 example, we've discovered 1 warning sign for Duopharma Biotech Berhad that you should be aware of before investing here.