PharmaEssentia (TWSE:6446) delivers shareholders massive 50% CAGR over 5 years, surging 11% in the last week alone

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the PharmaEssentia Corporation (TWSE:6446) share price. It's 631% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 36% gain in the last three months. It really delights us to see such great share price performance for investors.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for PharmaEssentia

While PharmaEssentia made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

For the last half decade, PharmaEssentia can boast revenue growth at a rate of 61% per year. Even measured against other revenue-focussed companies, that's a good result. Arguably, this is well and truly reflected in the strong share price gain of 49%(per year) over the same period. It's never too late to start following a top notch stock like PharmaEssentia, since some long term winners go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how PharmaEssentia has grown profits over the years, but the future is more important for shareholders. This free interactive report on PharmaEssentia's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between PharmaEssentia's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that PharmaEssentia's TSR, at 652% is higher than its share price return of 631%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

It's good to see that PharmaEssentia has rewarded shareholders with a total shareholder return of 141% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 50% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand PharmaEssentia 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 PharmaEssentia , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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