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- TSE:3288
Open House Group's (TSE:3288) five-year earnings growth trails the solid shareholder returns
Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Open House Group Co., Ltd. (TSE:3288) share price is up 87% in the last 5 years, clearly besting the market return of around 50% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 46% in the last year, including dividends.
Since the stock has added JPÂ¥23b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
View our latest analysis for Open House Group
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. 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.
Over half a decade, Open House Group managed to grow its earnings per share at 18% a year. This EPS growth is higher than the 13% 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 7.20.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Open House Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. We note that for Open House Group the TSR over the last 5 years was 114%, 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 Open House Group shareholders have received a total shareholder return of 46% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 16%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Open House Group you might want to consider these 3 valuation metrics.
Of course Open House Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.
About TSE:3288
Excellent balance sheet established dividend payer.