Investors in Krka d. d (LJSE:KRKG) have seen strong returns of 232% over the past five years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Krka, d. d. (LJSE:KRKG) which saw its share price drive 157% higher over five years. Also pleasing for shareholders was the 14% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 12% in 90 days).

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Krka d. d achieved compound earnings per share (EPS) growth of 8.3% per year. This EPS growth is lower than the 21% 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. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Krka d. d's earnings, revenue and cash flow.

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 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 Krka d. d the TSR over the last 5 years was 232%, 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

Krka d. d's TSR for the year was broadly in line with the market average, at 65%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 27% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. Keeping this in mind, a solid next step might be to take a look at Krka d. d's dividend track record. This free interactive graph is a great place to start.

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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 Slovenian 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.