The SMS Pharmaceuticals (NSE:SMSPHARMA) Share Price Is Up 185% And Shareholders Are Boasting About It

Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right stock, you can make a lot more than 100%. For example, the SMS Pharmaceuticals Limited (NSE:SMSPHARMA) share price had more than doubled in just one year - up 185%. Also pleasing for shareholders was the 44% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 21% in 90 days). However, the longer term returns haven't been so impressive, with the stock up just 30% in the last three years.

Check out our latest analysis for SMS Pharmaceuticals

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the last twelve months, SMS Pharmaceuticals actually shrank its EPS by 21%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We doubt the modest 0.2% dividend yield is doing much to support the share price. SMS Pharmaceuticals' revenue actually dropped 4.2% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of SMS Pharmaceuticals' earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of SMS Pharmaceuticals, it has a TSR of 188% for the last year. 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 SMS Pharmaceuticals has rewarded shareholders with a total shareholder return of 188% in the last twelve months. That's including the dividend. That's better than the annualised return of 9% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand SMS Pharmaceuticals better, we need to consider many other factors. For instance, we've identified 4 warning signs for SMS Pharmaceuticals (1 is a bit unpleasant) that you should be aware of.

SMS Pharmaceuticals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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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