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The Fisher & Paykel Healthcare (NZSE:FPH) Share Price Has Gained 223%, So Why Not Pay It Some Attention?

Simply Wall St

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. Long term Fisher & Paykel Healthcare Corporation Limited (NZSE:FPH) shareholders would be well aware of this, since the stock is up 223% in five years.

See our latest analysis for Fisher & Paykel Healthcare

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During five years of share price growth, Fisher & Paykel Healthcare achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is lower than the 26% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 46.55.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

NZSE:FPH Past and Future Earnings, October 12th 2019

This free interactive report on Fisher & Paykel Healthcare's 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Fisher & Paykel Healthcare's TSR for the last 5 years was 260%, 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

Fisher & Paykel Healthcare provided a TSR of 21% over the year (including dividends) . That's fairly close to the broader market return. We should note here that the five-year TSR is more impressive, at 29% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Fisher & Paykel Healthcare a stock worth watching. Before deciding if you like the current share price, check how Fisher & Paykel Healthcare scores on these 3 valuation metrics.

But note: Fisher & Paykel Healthcare may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.