Dermapharm Holding (ETR:DMP) shareholders have earned a 25% CAGR over the last three years

It hasn't been the best quarter for Dermapharm Holding SE (ETR:DMP) shareholders, since the share price has fallen 20% in that time. But don't let that distract from the very nice return generated over three years. After all, the share price is up a market-beating 85% in that time.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Dermapharm Holding

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Dermapharm Holding achieved compound earnings per share growth of 40% per year. The average annual share price increase of 23% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Dermapharm Holding has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Dermapharm Holding's financial health with this free 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Dermapharm Holding's TSR for the last 3 years was 95%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Dermapharm Holding shareholders are down 22% for the year (even including dividends), falling short of the market return. Meanwhile, the broader market slid about 9.0%, likely weighing on the stock. Investors are up over three years, booking 25% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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 instance, we've identified 4 warning signs for Dermapharm Holding (1 shouldn't be ignored) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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