Does Davicom Semiconductor's (TPE:3094) Share Price Gain of 24% Match Its Business Performance?

Diversification is a key tool for dealing with stock price volatility. Of course, the aim of the game is to pick stocks that do better than an index fund. One such company is Davicom Semiconductor, Inc. (TPE:3094), which saw its share price increase 24% in the last year, slightly above the market return of around 22% (not including dividends). In contrast, the longer term returns are negative, since the share price is 14% lower than it was three years ago.

View our latest analysis for Davicom Semiconductor

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. 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 the last year Davicom Semiconductor grew its earnings per share (EPS) by 35%. This EPS growth is significantly higher than the 24% increase in the share price. So it seems like the market has cooled on Davicom Semiconductor, despite the growth. Interesting.

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

Dive deeper into Davicom Semiconductor's key metrics by checking this interactive graph of Davicom Semiconductor's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Davicom Semiconductor's TSR for the last year was 29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Davicom Semiconductor shareholders have received returns of 29% over twelve months (even including dividends), which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 3%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand Davicom Semiconductor better, we need to consider many other factors. For instance, we've identified 4 warning signs for Davicom Semiconductor (1 is potentially serious) that you should be aware of.

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 TW 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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