Shareholders Of Pharmanutra (BIT:PHN) Must Be Happy With Their 220% Total Return

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Pharmanutra S.p.A. (BIT:PHN) share price is 198% higher than it was three years ago. That sort of return is as solid as granite. Also pleasing for shareholders was the 40% gain in the last three months.

View our latest analysis for Pharmanutra

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During three years of share price growth, Pharmanutra achieved compound earnings per share growth of 38% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 44% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Au contraire, the share price change has arguably mimicked the EPS growth.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Pharmanutra the TSR over the last 3 years was 220%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Pharmanutra shareholders have gained 66% (in total) over the last year. That includes the value of the dividend. That's better than the annualized TSR of 47% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand Pharmanutra better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Pharmanutra you should know about.

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