Shareholders of Medistim (OB:MEDI) Must Be Delighted With Their 391% Total Return

By
Simply Wall St
Published
July 24, 2021
OB:MEDI
Source: Shutterstock

We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Medistim ASA (OB:MEDI) share price has soared 347% over five years. This just goes to show the value creation that some businesses can achieve. It's even up 10% in the last week.

Check out our latest analysis for Medistim

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, Medistim achieved compound earnings per share (EPS) growth of 10% per year. This EPS growth is lower than the 35% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 74.95.

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

earnings-per-share-growth
OB:MEDI Earnings Per Share Growth July 24th 2021

This free interactive report on Medistim'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Medistim, it has a TSR of 391% for the last 5 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

Medistim's TSR for the year was broadly in line with the market average, at 37%. We should note here that the five-year TSR is more impressive, at 37% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Medistim a stock worth watching. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO 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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