Shareholders of IOL Chemicals and Pharmaceuticals (NSE:IOLCP) Must Be Delighted With Their 869% Total Return

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the IOL Chemicals and Pharmaceuticals Limited (NSE:IOLCP) share price. It's 849% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. But it's down 8.0% in the last week.

We love happy stories like this one. The company should be really proud of that performance!

See our latest analysis for IOL Chemicals and Pharmaceuticals

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 the last half decade, IOL Chemicals and Pharmaceuticals became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the IOL Chemicals and Pharmaceuticals share price has gained 795% in three years. During the same period, EPS grew by 252% each year. This EPS growth is higher than the 108% 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. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.72.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into IOL Chemicals and Pharmaceuticals' key metrics by checking this interactive graph of IOL Chemicals and Pharmaceuticals's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of IOL Chemicals and Pharmaceuticals, it has a TSR of 869% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that IOL Chemicals and Pharmaceuticals has rewarded shareholders with a total shareholder return of 324% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 58%. Therefore it seems like sentiment around the company has been positive lately. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for IOL Chemicals and Pharmaceuticals (of which 1 is a bit unpleasant!) you should know about.

Of course IOL Chemicals and Pharmaceuticals may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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