NHK Spring's (TSE:5991) 16% CAGR outpaced the company's earnings growth over the same five-year period

NHK Spring Co., Ltd. (TSE:5991) shareholders have seen the share price descend 12% over the month. While that's not great, the returns over five years have been decent. It's good to see the share price is up 86% in that time, better than its market return of 85%.

The past week has proven to be lucrative for NHK Spring investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for NHK Spring

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 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.

During five years of share price growth, NHK Spring achieved compound earnings per share (EPS) growth of 44% per year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 8.79 also suggests market apprehension.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that NHK Spring has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of NHK Spring, it has a TSR of 114% 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 NHK Spring shareholders have received a total shareholder return of 61% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 16%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand NHK Spring better, we need to consider many other factors. For instance, we've identified 1 warning sign for NHK Spring that you should be aware of.

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 Japanese 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com