Mitani's (TSE:8066) five-year total shareholder returns outpace the underlying earnings growth

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Mitani Corporation (TSE:8066) has fallen short of that second goal, with a share price rise of 24% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 13%.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Mitani

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Mitani achieved compound earnings per share (EPS) growth of 12% per year. This EPS growth is higher than the 4% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.33.

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

Dive deeper into Mitani's key metrics by checking this interactive graph of Mitani'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. In the case of Mitani, it has a TSR of 40% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Mitani shareholders have received a total shareholder return of 17% over one year. Of course, that includes the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Mitani better, we need to consider many other factors. For instance, we've identified 1 warning sign for Mitani that you should be aware of.

We will like Mitani better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.