Kotobuki Spirits' (TSE:2222) investors will be pleased with their solid 124% return over the last three years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For example, the Kotobuki Spirits Co., Ltd. (TSE:2222) share price has soared 118% in the last three years. Most would be happy with that. It's also good to see the share price up 13% over the last quarter.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Kotobuki Spirits

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 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 three years of share price growth, Kotobuki Spirits achieved compound earnings per share growth of 196% per year. The average annual share price increase of 30% is actually lower than the EPS growth. 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).

We know that Kotobuki Spirits has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Kotobuki Spirits' balance sheet strength is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Kotobuki Spirits the TSR over the last 3 years was 124%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Kotobuki Spirits provided a TSR of 0.7% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 5% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Is Kotobuki Spirits cheap compared to other companies? These 3 valuation measures might help you decide.

Of course Kotobuki Spirits 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.