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When you buy a stock, there is always a chance that it will drop by 100%. But on a lighter note, a good company can see its stock price rise by over 100%. For example, the price of Deswell Industries, Inc. (NASDAQ: DSWL) the stock has risen 157% over the past five years. It’s also good to see the stock price rise 23% in the last quarter. But that could be related to the strength of the market, which is up 14% in the past three months.

Check out our latest review for Deswell Industries

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are overly responsive dynamic systems and investors are not always rational. An imperfect but reasonable way to gauge how sentiment is changing around a company is to compare earnings per share (EPS) with the stock price.

We know Deswell Industries has been profitable in the past. However, it has recorded a loss over the past twelve months, which suggests that profit may be an unreliable measure at this point. So we might find that other metrics can better explain stock price movements.

We note that the dividend is higher than it was before – still nice to see. The business may mature and dividend investors will buy for yield. We postulate that income growth over the past five years of 10% per year would encourage people to invest.

The graph below illustrates the evolution of earnings and income over time (reveal the exact values ​​by clicking on the image).

profit and revenue growth

We consider it positive that insiders have made significant purchases over the past year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide for the business. This free interactive report on Deswell Industries’ profit, revenue and cash flow is a great place to start if you want to dig deeper into your stock research.

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 discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. Arguably, the TSR gives a more complete picture of the return generated by a stock. As it turns out, Deswell Industries’ TSR for the past 5 years was 235%, which exceeds the share price return mentioned above. And there’s no price guessing that dividend payments are a big reason for the discrepancy!

A different perspective

Deswell Industries shareholders are up 16% for the year (including dividends). Unfortunately, this does not match the performance of the market. This is probably a good sign that the company has an even better long-term performance history, having provided shareholders with an annual TSR of 27% over five years. It may well be that this is a company worth watching, given the consistently positive market reception over time. It is always interesting to follow the evolution of stock prices over the long term. But to understand Deswell Industries better, there are many other factors to consider. Consider, for example, the ever-present specter of investment risk. We have identified 2 warning signs with Deswell Industries , and understanding them should be part of your investment process.

Deswell Industries isn’t the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider buys, might be just the ticket.

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the US stock exchanges.

This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.

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