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Did You Participate In Any Of Simulations Plus' (NASDAQ:SLP) Incredible 725% Return?

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Simulations Plus, Inc. (NASDAQ:SLP) shareholders might be concerned after seeing the share price drop 13% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been spectacular. In fact, during that period, the share price climbed 679%. Impressive! So it might be that some shareholders are taking profits after good performance. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

Anyone who held for that rewarding ride would probably be keen to talk about it.

See our latest analysis for Simulations Plus

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Simulations Plus achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is slower than the share price growth of 51% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 95.75.

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

earnings-per-share-growth
earnings-per-share-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Simulations Plus' 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Simulations Plus, it has a TSR of 725% 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

Investors in Simulations Plus had a tough year, with a total loss of 2.7% (including dividends), against a market gain of about 40%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 52% 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. It's always interesting to track share price performance over the longer term. But to understand Simulations Plus better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Simulations Plus .

We will like Simulations Plus better if we see some big insider buys. While we wait, check out this free list of growing companies 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 US exchanges.

This article by Simply Wall St is general in nature. 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 (at) simplywallst.com.