Dai Nippon Printing's (TSE:7912) investors will be pleased with their stellar 118% return over the last five years

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Dai Nippon Printing Co., Ltd. (TSE:7912) share price is up 97% in the last 5 years, clearly besting the market return of around 74% (ignoring dividends).

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

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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).

Over half a decade, Dai Nippon Printing managed to grow its earnings per share at 46% a year. The EPS growth is more impressive than the yearly share price gain of 15% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 7.17 also suggests market apprehension.

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

We know that Dai Nippon Printing has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Dai Nippon Printing stock, you should check out this FREE detailed report on its balance sheet.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Dai Nippon Printing's TSR for the last 5 years was 118%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Dai Nippon Printing had a tough year, with a total loss of 10% (including dividends), against a market gain of about 2.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 17%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Dai Nippon Printing better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Dai Nippon Printing you should be aware of, and 1 of them makes us a bit uncomfortable.

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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.