Aspen Pharmacare Holdings' (JSE:APN) five-year earnings growth trails the 9.2% YoY shareholder returns

It hasn't been the best quarter for Aspen Pharmacare Holdings Limited (JSE:APN) shareholders, since the share price has fallen 12% in that time. On the bright side the share price is up over the last half decade. Unfortunately its return of 44% is below the market return of 52%.

Since the stock has added R2.4b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Aspen Pharmacare Holdings

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 five years of share price growth, Aspen Pharmacare Holdings achieved compound earnings per share (EPS) growth of 22% per year. This EPS growth is higher than the 8% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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

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

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Aspen Pharmacare Holdings the TSR over the last 5 years was 55%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Aspen Pharmacare Holdings had a tough year, with a total loss of 11% (including dividends), against a market gain of about 17%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Aspen Pharmacare Holdings that you should be aware of before investing here.

We will like Aspen Pharmacare Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.