Did Business Growth Power Zoom's (TYO:6694) Share Price Gain of 257%?

Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example Zoom Corporation (TYO:6694). Its share price is already up an impressive 257% in the last twelve months. It's also good to see the share price up 85% over the last quarter. Looking back further, the stock price is 32% higher than it was three years ago.

View our latest analysis for Zoom

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last year Zoom grew its earnings per share (EPS) by 106%. The share price gain of 257% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Zoom's TSR for the last year was 271%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Pleasingly, Zoom's total shareholder return last year was 271%. And yes, that does include the dividend. That's better than the annualized TSR of 13% over the last three years. Given the track record of solid returns over varying time frames, it might be worth putting Zoom on your watchlist. It's always interesting to track share price performance over the longer term. But to understand Zoom better, we need to consider many other factors. Even so, be aware that Zoom is showing 6 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on JP exchanges.

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This article by Simply Wall St is general in nature. 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.
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