Stock Analysis

Sojitz's (TSE:2768) three-year total shareholder returns outpace the underlying earnings growth

TSE:2768
Source: Shutterstock

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. For example, the Sojitz Corporation (TSE:2768) share price has soared 141% in the last three years. That sort of return is as solid as granite. On the other hand, the stock price has retraced 3.2% in the last week.

In light of the stock dropping 3.2% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

View our latest analysis for Sojitz

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.

Sojitz was able to grow its EPS at 60% per year over three years, sending the share price higher. This EPS growth is higher than the 34% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.89.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
TSE:2768 Earnings Per Share Growth May 24th 2024

We know that Sojitz has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Sojitz's financial health with this free report on its balance sheet.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Sojitz, it has a TSR of 179% 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

It's good to see that Sojitz has rewarded shareholders with a total shareholder return of 50% in the last twelve months. And that does include the dividend. That's better than the annualised return of 25% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Sojitz better, we need to consider many other factors. Take risks, for example - Sojitz has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

But note: Sojitz may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

Valuation is complex, but we're helping make it simple.

Find out whether Sojitz is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.