Despite shrinking by US$85m in the past week, DorianG (NYSE:LPG) shareholders are still up 983% over 5 years
Dorian LPG Ltd. (NYSE:LPG) shareholders have seen the share price descend 22% over the month. But that does not change the realty that the stock's performance has been terrific, over five years. Indeed, the share price is up a whopping 492% in that time. So we don't think the recent decline in the share price means its story is a sad one. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.
Although DorianG has shed US$85m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Check out our latest analysis for DorianG
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, DorianG moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the DorianG share price is up 164% in the last three years. In the same period, EPS is up 70% per year. This EPS growth is higher than the 38% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.81.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on DorianG's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, DorianG's TSR for the last 5 years was 983%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that DorianG has rewarded shareholders with a total shareholder return of 94% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 61%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Case in point: We've spotted 4 warning signs for DorianG you should be aware of, and 1 of them is significant.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
