Stanley Electric's (TSE:6923) three-year earnings growth trails the respectable shareholder returns

Buying a low-cost index fund will get you the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. Unfortunately for shareholders, while the Stanley Electric Co., Ltd. (TSE:6923) share price is up 23% in the last three years, that falls short of the market return. Disappointingly, the share price is down 9.6% in the last year.

Since it's been a strong week for Stanley Electric shareholders, let's have a look at trend of the longer term fundamentals.

We've discovered 1 warning sign about Stanley Electric. View them for free.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Stanley Electric was able to grow its EPS at 13% per year over three years, sending the share price higher. The average annual share price increase of 7% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

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

We know that Stanley Electric has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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 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 and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Stanley Electric, it has a TSR of 31% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Stanley Electric shareholders are down 7.5% over twelve months (even including dividends), which isn't far from the market return of -8.0%. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Stanley Electric .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.