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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. To wit, the Integral Diagnostics Limited (ASX:IDX) share price has flown 102% in the last three years. How nice for those who held the stock!
View our latest analysis for Integral Diagnostics
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 three years of share price growth, Integral Diagnostics achieved compound earnings per share growth of 4.0% per year. In comparison, the 26% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Integral Diagnostics' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Integral Diagnostics, it has a TSR of 125% for the last 3 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
It's nice to see that Integral Diagnostics shareholders have gained 19% (in total) over the last year. And yes, that does include the dividend. That falls short of the 31% it has made, for shareholders, each year, over three years. It's always interesting to track share price performance over the longer term. But to understand Integral Diagnostics better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Integral Diagnostics you should know about.