Yamaha Motor (TSE:7272) shareholders have earned a 18% CAGR over the last five years

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Yamaha Motor Co., Ltd. (TSE:7272) shareholders have enjoyed a 89% share price rise over the last half decade, well in excess of the market return of around 58% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 31% in the last year , including dividends .

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Yamaha Motor

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.

Over half a decade, Yamaha Motor managed to grow its earnings per share at 13% a year. That makes the EPS growth particularly close to the yearly share price growth of 14%. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

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

It is of course excellent to see how Yamaha Motor has grown profits over the years, but the future is more important for shareholders. This free interactive report on Yamaha Motor's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Yamaha Motor the TSR over the last 5 years was 129%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Yamaha Motor shareholders have received returns of 31% over twelve months (even including dividends), which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 18%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. Even so, be aware that Yamaha Motor is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.