Hokuetsu Industries (TSE:6364) jumps 10% this week, though earnings growth is still tracking behind three-year shareholder returns

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For instance the Hokuetsu Industries Co., Ltd. (TSE:6364) share price is 111% higher than it was three years ago. How nice for those who held the stock! It's also good to see the share price up 21% over the last quarter.

Since the stock has added JP¥6.3b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Hokuetsu Industries

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 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.

During three years of share price growth, Hokuetsu Industries achieved compound earnings per share growth of 40% per year. The average annual share price increase of 28% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how Hokuetsu Industries has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Hokuetsu Industries the TSR over the last 3 years was 133%, 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 Hokuetsu Industries has rewarded shareholders with a total shareholder return of 84% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 18%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Hokuetsu Industries you might want to consider these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.