Sangetsu (TSE:8130) pulls back 8.5% this week, but still delivers shareholders strong 31% CAGR over 3 years

Sangetsu Corporation (TSE:8130) shareholders have seen the share price descend 12% over the month. But that doesn't change the fact that the returns over the last three years have been pleasing. After all, the share price is up a market-beating 95% in that time.

Although Sangetsu has shed JP¥16b 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 Sangetsu

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 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).

Sangetsu became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

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

It is of course excellent to see how Sangetsu has grown profits over the years, but the future is more important for shareholders. This free interactive report on Sangetsu's balance sheet strength 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Sangetsu's TSR for the last 3 years was 125%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Sangetsu shareholders are up 27% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. This suggests the company might be improving over time. Keeping this in mind, a solid next step might be to take a look at Sangetsu's dividend track record. This free interactive graph is a great place to start.

We will like Sangetsu better if we see some big insider buys. While we wait, check out this free list of growing companies 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.