Daihatsu Infinearth Mfg.Co.Ltd (TSE:6023) jumps 10% this week, though earnings growth is still tracking behind five-year shareholder returns

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. For example, the Daihatsu Infinearth Mfg.Co.,Ltd (TSE:6023) share price is up a whopping 763% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 56% in about a quarter. We love happy stories like this one. The company should be really proud of that performance!

Since it's been a strong week for Daihatsu Infinearth Mfg.Co.Ltd shareholders, let's have a look at trend of the longer term fundamentals.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Over half a decade, Daihatsu Infinearth Mfg.Co.Ltd managed to grow its earnings per share at 30% a year. This EPS growth is slower than the share price growth of 54% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. 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).

It is of course excellent to see how Daihatsu Infinearth Mfg.Co.Ltd has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Daihatsu Infinearth Mfg.Co.Ltd stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Daihatsu Infinearth Mfg.Co.Ltd the TSR over the last 5 years was 935%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Daihatsu Infinearth Mfg.Co.Ltd shareholders have received a total shareholder return of 152% over one year. Of course, that includes the dividend. That's better than the annualised return of 60% 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. 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 example, we've discovered 1 warning sign for Daihatsu Infinearth Mfg.Co.Ltd that you should be aware of before investing here.

We will like Daihatsu Infinearth Mfg.Co.Ltd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.