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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. One great example is Chemed Corporation (NYSE:CHE) which saw its share price drive 283% higher over five years. It’s also up 11% in about a month. But the price may well have benefitted from a buoyant market, since stocks have gained 5.9% in the last thirty days.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ By comparing earnings per share (EPS) and and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over half a decade, Chemed managed to grow its earnings per share at 25% a year. This EPS growth is reasonably close to the 31% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Chemed has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Chemed will revenue can grow in the future.
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 discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Chemed the TSR over the last 5 years was 295%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It’s good to see that Chemed has rewarded shareholders with a total shareholder return of 25% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 32% TSR per annum it has made for shareholders, each year, over five years. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.