Goldwin (TSE:8111) stock performs better than its underlying earnings growth over last three years

Investors can buy low cost index fund if they want to receive the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. That's what has happened with the Goldwin Inc. (TSE:8111) share price. It's up 29% over three years, but that is below the market return. Disappointingly, the share price is down 15% in the last year.

Since the stock has added JP¥12b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Goldwin

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

During three years of share price growth, Goldwin achieved compound earnings per share growth of 25% per year. This EPS growth is higher than the 9% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Goldwin has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Goldwin's TSR for the last 3 years was 34%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Investors in Goldwin had a tough year, with a total loss of 14% (including dividends), against a market gain of about 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Goldwin better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Goldwin .

But note: Goldwin may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.