DCW (NSE:DCW) shareholder returns have been incredible, earning 304% in 5 years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. Long term DCW Limited (NSE:DCW) shareholders would be well aware of this, since the stock is up 297% in five years. And in the last week the share price has popped 17%.

Since it's been a strong week for DCW shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for DCW

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 the five years of share price growth, DCW moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the DCW share price is up 47% in the last three years. Meanwhile, EPS is up 54% per year. This EPS growth is higher than the 14% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. Of course, with a P/E ratio of 112.67, the market remains optimistic.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on DCW's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, DCW's TSR for the last 5 years was 304%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

DCW shareholders are up 35% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 32% per year over five year. This suggests the company might be improving over 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 1 warning sign with DCW , 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 Indian 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com