Sato Foods Industries (TYO:2814) Has Compensated Shareholders With A Respectable 98% Return On Their Investment

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Sato Foods Industries Co., Ltd. (TYO:2814) shareholders have enjoyed a 77% share price rise over the last half decade, well in excess of the market return of around 36% (not including dividends).

See our latest analysis for Sato Foods Industries

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 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.

Over half a decade, Sato Foods Industries managed to grow its earnings per share at 42% a year. The EPS growth is more impressive than the yearly share price gain of 12% over the same period. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.67.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Sato Foods Industries' key metrics by checking this interactive graph of Sato Foods Industries's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Sato Foods Industries' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Sato Foods Industries' TSR of 98% over the last 5 years is better than the share price return.

A Different Perspective

Sato Foods Industries shareholders are down 1.1% for the year, but the market itself is up 9.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Sato Foods Industries that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on JP exchanges.

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This article by Simply Wall St is general in nature. 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.
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