The 57% return delivered to Billing System's (TSE:3623) shareholders actually lagged YoY earnings growth

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Billing System Corporation (TSE:3623) share price is 55% higher than it was a year ago, much better than the market return of around 11% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! However, the longer term returns haven't been so impressive, with the stock up just 29% in the last three years.

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

View our latest analysis for Billing System

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.

Billing System was able to grow EPS by 59% in the last twelve months. This EPS growth is reasonably close to the 55% increase in the share price. So this implies that investor expectations of the company have remained pretty steady. It looks like the share price is responding to the EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Billing System's TSR for the last 1 year was 57%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Billing System shareholders have received a total shareholder return of 57% over one year. Of course, that includes the dividend. That's better than the annualised return of 3% 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. Take risks, for example - Billing System has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Of course Billing System 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.

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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.