Cyclopharm (ASX:CYC) Has Rewarded Shareholders With An Exceptional 401% Total Return On Their Investment

Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. For example, the Cyclopharm Limited (ASX:CYC) share price is up a whopping 371% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 39% in about a quarter.

View our latest analysis for Cyclopharm

Cyclopharm isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years Cyclopharm saw its revenue grow at 6.5% per year. That's a fairly respectable growth rate. However, the share price gain of 36% during the period is considerably stronger. It might not be cheap but a (long-term) growth stock like this is usually well worth taking a closer look at.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Cyclopharm the TSR over the last 5 years was 401%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Cyclopharm has rewarded shareholders with a total shareholder return of 146% in the last twelve months. And that does include the dividend. That's better than the annualised return of 38% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Cyclopharm (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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