Matsuya Foods Holdings' (TSE:9887) three-year earnings growth trails the favorable shareholder returns

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, Matsuya Foods Holdings Co., Ltd. (TSE:9887) shareholders have seen the share price rise 89% over three years, well in excess of the market return (31%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 67%, including dividends.

The past week has proven to be lucrative for Matsuya Foods Holdings investors, so let's see if fundamentals drove the company's three-year performance.

Check out our latest analysis for Matsuya Foods Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Matsuya Foods Holdings achieved compound earnings per share growth of 78% per year. This EPS growth is higher than the 24% 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).

This free interactive report on Matsuya Foods Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Matsuya Foods Holdings the TSR over the last 3 years was 92%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Matsuya Foods Holdings shareholders have received a total shareholder return of 67% over one year. That's including the dividend. That's better than the annualised return of 12% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Matsuya Foods Holdings you should be aware of.

But note: Matsuya Foods Holdings 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.