PharmaEssentia (TWSE:6446) shareholders have earned a 88% CAGR over the last three years

PharmaEssentia Corporation (TWSE:6446) shareholders might be concerned after seeing the share price drop 11% in the last month. But over the last three years the stock has shone bright like a diamond. The longer term view reveals that the share price is up 551% in that period. As long term investors the recent fall doesn't detract all that much from the longer term story. The only way to form a view of whether the current price is justified is to consider the merits of the business itself. It really delights us to see such great share price performance for investors.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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.

PharmaEssentia's revenue trended up 71% each year over three years. That's well above most pre-profit companies. And it's not just the revenue that is taking off. The share price is up 87% per year in that time. Despite the strong run, top performers like PharmaEssentia have been known to go on winning for decades. So we'd recommend you take a closer look at this one, or even put it on your watchlist.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It is of course excellent to see how PharmaEssentia has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling PharmaEssentia stock, you should check out this FREE detailed report on its balance sheet.

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 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. PharmaEssentia hasn't been paying dividends, but its TSR of 559% exceeds its share price return of 551%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

We're pleased to report that PharmaEssentia shareholders have received a total shareholder return of 103% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 42% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that PharmaEssentia is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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