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Did Business Growth Power Dicker Data’s (ASX:DDR) Share Price Gain of 177%? – 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 Dicker Data Limited (ASX:DDR) shareholders would be well aware of this, since the stock is up 177% in five years.
On top of that, the share price is up 31% in about a quarter.
The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.



View our latest analysis for Dicker Data

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance.
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, Dicker Data achieved compound earnings per share (EPS) growth of 22% per year.
This EPS growth is remarkably close to the 23% average annual increase in the share price.
Therefore one could conclude that sentiment towards the shares hasn’t morphed very much.
In fact, the share price seems to largely reflect the EPS growth.

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


ASX:DDR Past and Future Earnings, March 17th 2019
ASX:DDR Past and Future Earnings, March 17th 2019

We consider it positive that insiders have made significant purchases in the last year.
Even so, future earnings will be far more important to whether current shareholders make money.
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR).
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.
So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return.
In the case of Dicker Data, it has a TSR of 285% 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

It’s nice to see that Dicker Data shareholders have received a total shareholder return of 38% over the last year.
Of course, that includes the dividend.
That’s better than the annualised return of 31% over half a decade, implying that the company is doing better recently.
Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity.
It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Dicker Data is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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