Update: Desane Group Holdings (ASX:DGH) Stock Gained 88% In The Last Three Years

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By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Desane Group Holdings Limited (ASX:DGH), which is up 88%, over three years, soundly beating the market return of 17% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 14%, including dividends.

View our latest analysis for Desane Group Holdings

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Desane Group Holdings was able to grow its EPS at 87% per year over three years, sending the share price higher. The average annual share price increase of 24% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 1.84 also reflects the negative sentiment around the stock.

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

ASX:DGH Past and Future Earnings, May 13th 2019
ASX:DGH Past and Future Earnings, May 13th 2019

Dive deeper into Desane Group Holdings's key metrics by checking this interactive graph of Desane Group Holdings's earnings, revenue and cash flow.

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. We note that for Desane Group Holdings the TSR over the last 3 years was 133%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Desane Group Holdings has rewarded shareholders with a total shareholder return of 14% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 25% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before spending more time on Desane Group Holdings it might be wise to click here to see if insiders have been buying or selling shares.

We will like Desane Group Holdings 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 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.