The total return for TamronLtd (TSE:7740) investors has risen faster than earnings growth over the last five years

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Tamron Co.,Ltd. (TSE:7740) which saw its share price drive 226% higher over five years. In the last week shares have slid back 4.8%.

Although TamronLtd has shed JP¥8.7b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for TamronLtd

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 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, TamronLtd managed to grow its earnings per share at 29% a year. So the EPS growth rate is rather close to the annualized share price gain of 27% per year. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how TamronLtd has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling TamronLtd stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 TamronLtd the TSR over the last 5 years was 285%, 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

It's nice to see that TamronLtd shareholders have received a total shareholder return of 53% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 31%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand TamronLtd better, we need to consider many other factors. For instance, we've identified 1 warning sign for TamronLtd that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.