SaizeriyaLtd's (TSE:7581) earnings growth rate lags the 16% CAGR delivered to shareholders

It hasn't been the best quarter for Saizeriya Co.,Ltd. (TSE:7581) shareholders, since the share price has fallen 14% in that time. But in stark contrast, the returns over the last half decade have impressed. It's fair to say most would be happy with 106% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now.

Since the long term performance has been good but there's been a recent pullback of 4.1%, let's check if the fundamentals match the share price.

Check out our latest analysis for SaizeriyaLtd

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).

During five years of share price growth, SaizeriyaLtd achieved compound earnings per share (EPS) growth of 10% per year. This EPS growth is lower than the 16% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that SaizeriyaLtd 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?

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for SaizeriyaLtd the TSR over the last 5 years was 113%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

SaizeriyaLtd shareholders are down 9.7% for the year (even including dividends), but the market itself is up 6.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 16% 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 forming an opinion on SaizeriyaLtd 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.