Kawasaki Heavy Industries' (TSE:7012) investors will be pleased with their solid 257% return over the last three years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Kawasaki Heavy Industries, Ltd. (TSE:7012) share price has soared 234% in the last three years. How nice for those who held the stock! On top of that, the share price is up 23% in about a quarter.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Kawasaki Heavy Industries

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Kawasaki Heavy Industries was able to grow its EPS at 71% per year over three years, sending the share price higher. This EPS growth is higher than the 49% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Kawasaki Heavy Industries has grown profits over the years, but the future is more important for shareholders. This free interactive report on Kawasaki Heavy Industries' balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Kawasaki Heavy Industries the TSR over the last 3 years was 257%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Kawasaki Heavy Industries shareholders have received a total shareholder return of 116% over one year. Of course, that includes the dividend. That's better than the annualised return of 27% 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 Kawasaki Heavy Industries better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Kawasaki Heavy Industries you should be aware of, and 1 of them doesn't sit too well with us.

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.