Waseda Academy (TSE:4718) stock performs better than its underlying earnings growth over last three years

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For instance the Waseda Academy Co., Ltd. (TSE:4718) share price is 105% higher than it was three years ago. That sort of return is as solid as granite. It's also good to see the share price up 16% over the last quarter.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

We check all companies for important risks. See what we found for Waseda Academy in our free report.

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

Waseda Academy was able to grow its EPS at 35% per year over three years, sending the share price higher. This EPS growth is higher than the 27% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

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 Waseda Academy has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Waseda Academy stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Waseda Academy the TSR over the last 3 years was 121%, 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 good to see that Waseda Academy has rewarded shareholders with a total shareholder return of 39% in the last twelve months. And that does include the dividend. That's better than the annualised return of 18% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on Waseda Academy you might want to consider these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.