Ypsomed Holding's (VTX:YPSN) investors will be pleased with their favorable 59% return over the last three years

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, the Ypsomed Holding AG (VTX:YPSN) share price is up 56% in the last three years, clearly besting the market return of around 25% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 15% , including dividends .

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 Ypsomed Holding

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Ypsomed Holding achieved compound earnings per share growth of 36% per year. This EPS growth is higher than the 16% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. Having said that, the market is still optimistic, given the P/E ratio of 78.63.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Ypsomed Holding has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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 Ypsomed Holding the TSR over the last 3 years was 59%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Ypsomed Holding shareholders have received a total shareholder return of 15% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Ypsomed Holding better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Ypsomed Holding , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.