The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. For example, the D-Link Corporation (TPE:2332) share price has soared 172% in the last half decade. Most would be very happy with that. It's also good to see the share price up 55% over the last quarter.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, D-Link moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into D-Link's key metrics by checking this interactive graph of D-Link's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between D-Link'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. Its history of dividend payouts mean that D-Link's TSR of 191% over the last 5 years is better than the share price return.
A Different Perspective
We're pleased to report that D-Link shareholders have received a total shareholder return of 116% over one year. That's better than the annualised return of 24% over half a decade, implying that the company is doing better recently. 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. For instance, we've identified 2 warning signs for D-Link 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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D-Link Corporation researches, develops, and sells local area computer network systems, wireless local area computer networks, and spare parts for integrated circuits in Taiwan and internationally.
Excellent balance sheet with questionable track record.
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