Takaoka Toko's (TSE:6617) five-year total shareholder returns outpace the underlying earnings growth

It might be of some concern to shareholders to see the Takaoka Toko Co., Ltd. (TSE:6617) share price down 19% in the last month. But the silver lining is the stock is up over five years. However we are not very impressed because the share price is only up 60%, less than the market return of 79%.

Since the long term performance has been good but there's been a recent pullback of 17%, let's check if the fundamentals match the share price.

View our latest analysis for Takaoka Toko

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over half a decade, Takaoka Toko managed to grow its earnings per share at 25% a year. The EPS growth is more impressive than the yearly share price gain of 10% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.89.

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

We know that Takaoka Toko 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?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Takaoka Toko, it has a TSR of 90% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Takaoka Toko shareholders gained a total return of 3.6% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 14% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Takaoka Toko better, we need to consider many other factors. Even so, be aware that Takaoka Toko is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.