MEITEC Group Holdings (TSE:9744) stock performs better than its underlying earnings growth over last five years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. Long term MEITEC Group Holdings Inc. (TSE:9744) shareholders would be well aware of this, since the stock is up 101% in five years. Also pleasing for shareholders was the 12% gain in the last three months. But this could be related to the strong market, which is up 13% in the last three months.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, MEITEC Group Holdings managed to grow its earnings per share at 8.6% a year. This EPS growth is lower than the 15% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into MEITEC Group Holdings' key metrics by checking this interactive graph of MEITEC Group Holdings'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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of MEITEC Group Holdings, it has a TSR of 148% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

MEITEC Group Holdings shareholders gained a total return of 5.7% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 20% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand MEITEC Group Holdings better, we need to consider many other factors. For instance, we've identified 1 warning sign for MEITEC Group Holdings that you should be aware of.

We will like MEITEC Group Holdings 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.