Despite lower earnings than three years ago, Howa Machinery (TSE:6203) investors are up 60% since then

Howa Machinery, Ltd. (TSE:6203) shareholders have seen the share price descend 14% over the month. On the other hand the share price is higher than it was three years ago. In that time, it is up 50%, which isn't bad, but not amazing either.

Since the long term performance has been good but there's been a recent pullback of 11%, let's check if the fundamentals match the share price.

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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 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.

Howa Machinery became profitable within the last three years. So we would expect a higher share price over the period.

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

We know that Howa Machinery has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Howa Machinery's TSR for the last 3 years was 60%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Howa Machinery has rewarded shareholders with a total shareholder return of 36% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 10% 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. To that end, you should learn about the 2 warning signs we've spotted with Howa Machinery (including 1 which is a bit unpleasant) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.