COSMOS Pharmaceutical's (TSE:3349) earnings growth rate lags the 3.6% CAGR delivered to shareholders

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the COSMOS Pharmaceutical Corporation (TSE:3349) share price is up 16% in the last five years, that's less than the market return. Unfortunately the share price is down 8.7% in the last year.

Although COSMOS Pharmaceutical has shed JP¥20b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for COSMOS Pharmaceutical

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.

Over half a decade, COSMOS Pharmaceutical managed to grow its earnings per share at 7.6% a year. This EPS growth is higher than the 3% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

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

We know that COSMOS Pharmaceutical has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of COSMOS Pharmaceutical, it has a TSR of 19% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in COSMOS Pharmaceutical had a tough year, with a total loss of 7.8% (including dividends), against a market gain of about 6.6%. 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 4% 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. Before deciding if you like the current share price, check how COSMOS Pharmaceutical scores on these 3 valuation metrics.

Of course COSMOS Pharmaceutical 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.