Japan Petroleum Exploration (TSE:1662) pulls back 3.5% this week, but still delivers shareholders stellar 34% CAGR over 3 years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Japan Petroleum Exploration Co., Ltd. (TSE:1662) share price has flown 104% in the last three years. How nice for those who held the stock! Unfortunately, though, the stock has dropped 3.5% over a week. But note that the broader market is down 2.5% since last week, and this may have impacted Japan Petroleum Exploration's share price.

In light of the stock dropping 3.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

Check out our latest analysis for Japan Petroleum Exploration

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Japan Petroleum Exploration moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

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

It is of course excellent to see how Japan Petroleum Exploration has grown profits over the years, but the future is more important for shareholders. This free interactive report on Japan Petroleum Exploration's balance sheet strength is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Japan Petroleum Exploration's TSR for the last 3 years was 143%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Japan Petroleum Exploration shareholders gained a total return of 1.9% during the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 19% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Japan Petroleum Exploration better, we need to consider many other factors. Even so, be aware that Japan Petroleum Exploration is showing 2 warning signs in our investment analysis , and 1 of those is significant...

We will like Japan Petroleum Exploration better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.