The 15% return this week takes Dr. Miele Cosmed Group's (WSE:DMG) shareholders five-year gains to 202%

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term Dr. Miele Cosmed Group S.A. (WSE:DMG) shareholders would be well aware of this, since the stock is up 187% in five years. Also pleasing for shareholders was the 25% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

Since the stock has added zł50m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Dr. Miele Cosmed Group

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 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 the five years of share price growth, Dr. Miele Cosmed Group moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Dr. Miele Cosmed Group share price is up 7.8% in the last three years. In the same period, EPS is up 5.1% per year. This EPS growth is higher than the 2.5% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The graphic below depicts how EPS has changed over time (unveil 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?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Dr. Miele Cosmed Group the TSR over the last 5 years was 202%, 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 good to see that Dr. Miele Cosmed Group has rewarded shareholders with a total shareholder return of 67% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 25%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Dr. Miele Cosmed Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Dr. Miele Cosmed Group , and understanding them should be part of your investment process.

We will like Dr. Miele Cosmed Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.