d'Amico International Shipping's (BIT:DIS) three-year total shareholder returns outpace the underlying earnings growth

We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. One such superstar is d'Amico International Shipping S.A. (BIT:DIS), which saw its share price soar 505% in three years. Also pleasing for shareholders was the 16% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 8.5% in 90 days). We love happy stories like this one. The company should be really proud of that performance!

Since the long term performance has been good but there's been a recent pullback of 6.7%, let's check if the fundamentals match the share price.

Check out our latest analysis for d'Amico International Shipping

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, d'Amico International Shipping achieved compound earnings per share growth of 123% per year. The average annual share price increase of 82% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.51.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how d'Amico International Shipping has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling d'Amico International Shipping stock, you should check out this FREE detailed report on its balance sheet.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of d'Amico International Shipping, it has a TSR of 541% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that d'Amico International Shipping has rewarded shareholders with a total shareholder return of 58% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 46% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand d'Amico International Shipping better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with d'Amico International Shipping (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

But note: d'Amico International Shipping may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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