MITSUI E&S' (TSE:7003) three-year earnings growth trails the 35% YoY shareholder returns

It hasn't been the best quarter for MITSUI E&S Co., Ltd. (TSE:7003) shareholders, since the share price has fallen 15% in that time. But that doesn't change the fact that the returns over the last three years have been very strong. The share price marched upwards over that time, and is now 141% higher than it was. After a run like that some may not be surprised to see prices moderate. The thing to consider is whether the underlying business is doing well enough to support the current price.

The past week has proven to be lucrative for MITSUI E&S investors, so let's see if fundamentals drove the company's three-year performance.

Check out our latest analysis for MITSUI E&S

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

MITSUI E&S was able to grow its EPS at 43% per year over three years, sending the share price higher. This EPS growth is higher than the 34% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. We'd venture the lowish P/E ratio of 2.36 also reflects the negative sentiment around the stock.

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

We know that MITSUI E&S has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at MITSUI E&S' financial health with this free report on its balance sheet.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, MITSUI E&S' TSR for the last 3 years was 144%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that MITSUI E&S shareholders have received a total shareholder return of 104% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 5%. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for MITSUI E&S you should know about.

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.