Sanyo Industries' (TSE:5958) five-year earnings growth trails the solid shareholder returns

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Sanyo Industries, Ltd. (TSE:5958) which saw its share price drive 101% higher over five years. It's also up 24% in about a month. But this could be related to good market conditions -- stocks in its market are up 11% in the last month.

Since the stock has added JP¥1.8b 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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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During five years of share price growth, Sanyo Industries achieved compound earnings per share (EPS) growth of 4.4% per year. This EPS growth is lower than the 15% 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. That's not necessarily surprising considering the five-year track record of earnings growth.

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

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

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Sanyo Industries' TSR for the last 5 years was 144%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Sanyo Industries has rewarded shareholders with a total shareholder return of 15% in the last twelve months. That's including the dividend. Having said that, the five-year TSR of 20% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Sanyo Industries better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Sanyo Industries you should know about.

But note: Sanyo Industries 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.

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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.