Dis-Chem Pharmacies' (JSE:DCP) five-year earnings growth trails the 11% YoY shareholder returns

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Dis-Chem Pharmacies Limited (JSE:DCP) share price is up 57% in the last 5 years, clearly besting the market return of around 6.0% (ignoring dividends).

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Dis-Chem Pharmacies

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, Dis-Chem Pharmacies achieved compound earnings per share (EPS) growth of 6.6% per year. This EPS growth is slower than the share price growth of 9% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Dis-Chem Pharmacies' earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Dis-Chem Pharmacies, it has a TSR of 67% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Dis-Chem Pharmacies shareholders have received a total shareholder return of 54% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on Dis-Chem Pharmacies it might be wise to click here to see if insiders have been buying or selling shares.

But note: Dis-Chem Pharmacies may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com