Nishi-Nippon Financial Holdings (TSE:7189) stock performs better than its underlying earnings growth over last five years

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. For example, the Nishi-Nippon Financial Holdings, Inc. (TSE:7189) share price has soared 207% in the last half decade. Most would be very happy with that. On top of that, the share price is up 22% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 19% in 90 days).

Since the stock has added JP¥9.5b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Nishi-Nippon Financial Holdings managed to grow its earnings per share at 11% a year. This EPS growth is slower than the share price growth of 25% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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

We know that Nishi-Nippon Financial Holdings has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Nishi-Nippon Financial Holdings' TSR for the last 5 years was 277%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Nishi-Nippon Financial Holdings shareholders have received a total shareholder return of 17% over the last year. And that does include the dividend. However, that falls short of the 30% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Nishi-Nippon Financial Holdings better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Nishi-Nippon Financial Holdings .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.