Nissin Foods HoldingsLtd's (TSE:2897) earnings growth rate lags the 12% CAGR delivered to shareholders

It hasn't been the best quarter for Nissin Foods Holdings Co.,Ltd. (TSE:2897) shareholders, since the share price has fallen 13% in that time. On the other hand the share price is higher than it was three years ago. Arguably you'd have been better off buying an index fund, because the gain of 35% in three years isn't amazing.

In light of the stock dropping 5.2% 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 Nissin Foods HoldingsLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Nissin Foods HoldingsLtd achieved compound earnings per share growth of 14% per year. The average annual share price increase of 10% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Nissin Foods HoldingsLtd's TSR for the last 3 years was 41%, 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

While the broader market gained around 9.2% in the last year, Nissin Foods HoldingsLtd shareholders lost 30% (even including dividends). 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 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Nissin Foods HoldingsLtd better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Nissin Foods HoldingsLtd you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.