DEPPON LOGISTICS' (SHSE:603056) earnings growth rate lags the 12% CAGR delivered to shareholders

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, DEPPON LOGISTICS Co., LTD. (SHSE:603056) shareholders have seen the share price rise 39% over three years, well in excess of the market decline (19%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 2.1%, including dividends.

Since the long term performance has been good but there's been a recent pullback of 3.7%, let's check if the fundamentals match the share price.

View our latest analysis for DEPPON LOGISTICS

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

DEPPON LOGISTICS was able to grow its EPS at 35% per year over three years, sending the share price higher. This EPS growth is higher than the 12% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

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

We know that DEPPON LOGISTICS has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on DEPPON LOGISTICS' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

DEPPON LOGISTICS shareholders are up 2.1% for the year (even including dividends). But that return falls short of the market. On the bright side, the longer term returns (running at about 5% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with DEPPON LOGISTICS , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued 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 Chinese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.