While Aspen Pharmacare Holdings Limited (JSE:APN) shareholders are probably generally happy, the stock hasn’t had particularly good run recently, with the share price falling 16% in the last quarter. But at least the stock is up over the last five years. Unfortunately its return of 35% is below the market return of 51%.
Although Aspen Pharmacare Holdings has shed R3.2b from its market cap this week, let’s take a look at its longer term fundamental trends and see if they’ve driven returns.
See our latest analysis for Aspen Pharmacare Holdings
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Aspen Pharmacare Holdings managed to grow its earnings per share at 22% a year. This EPS growth is higher than the 6% average annual increase in the share price. So it seems the market isn’t so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Aspen Pharmacare Holdings’ earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Aspen Pharmacare Holdings the TSR over the last 5 years was 45%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
Aspen Pharmacare Holdings shareholders are down 17% for the year (even including dividends), but the market itself is up 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 8% per year over half a decade. 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. 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 example, we’ve discovered 1 warning sign for Aspen Pharmacare Holdings that you should be aware of before investing here.
