Toyo Engineering (TSE:6330) soars 12% this week, taking five-year gains to 723%

Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Toyo Engineering Corporation (TSE:6330) share price has soared 686% over five years. And this is just one example of the epic gains achieved by some long term investors. It's also up 71% in about a month. We love happy stories like this one. The company should be really proud of that performance!

The past week has proven to be lucrative for Toyo Engineering investors, so let's see if fundamentals drove the company's five-year performance.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last half decade, Toyo Engineering became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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

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 Toyo Engineering the TSR over the last 5 years was 723%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Toyo Engineering has rewarded shareholders with a total shareholder return of 268% in the last twelve months. And that does include the dividend. That's better than the annualised return of 52% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Toyo Engineering better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Toyo Engineering (including 1 which shouldn't be ignored) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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

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.