Update: MK Seiko (TYO:5906) Stock Gained 46% In The Last Five Years

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the MK Seiko Co., Ltd. (TYO:5906) share price is up 46% in the last 5 years, clearly besting the market return of around 33% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 4.9% , including dividends .

See our latest analysis for MK Seiko

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, MK Seiko managed to grow its earnings per share at 2.7% a year. This EPS growth is lower than the 8% average annual increase in the share price. 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.

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

This free interactive report on MK Seiko's earnings, revenue and cash flow 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 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. We note that for MK Seiko the TSR over the last 5 years was 63%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

MK Seiko shareholders are up 4.9% for the year (even including dividends). But that was short of the market average. On the bright side, the longer term returns (running at about 10% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand MK Seiko better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with MK Seiko (including 1 which can't be ignored) .

We will like MK Seiko 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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