Shareholders Of Fujita Engineering (TYO:1770) Must Be Happy With Their 90% Return

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, the Fujita Engineering Co., Ltd. (TYO:1770) share price is up 57% in the last 5 years, clearly besting the market return of around 11% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 5.1% , including dividends .

Check out our latest analysis for Fujita Engineering

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).

During five years of share price growth, Fujita Engineering achieved compound earnings per share (EPS) growth of 11% per year. This EPS growth is reasonably close to the 9% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

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

Dive deeper into Fujita Engineering's key metrics by checking this interactive graph of Fujita Engineering's earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Fujita Engineering the TSR over the last 5 years was 90%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Fujita Engineering provided a TSR of 5.1% over the year (including dividends). That's fairly close to the broader market return. We should note here that the five-year TSR is more impressive, at 14% per year. Although the share price growth has slowed, the longer term story points to a business well worth watching. 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. For instance, we've identified 2 warning signs for Fujita Engineering that you should be aware of.

We will like Fujita Engineering better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on JP exchanges.

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This article by Simply Wall St is general in nature. 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.
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