Alfresa Holdings (TSE:2784) stock performs better than its underlying earnings growth over last three years

Low-cost index funds make it easy to achieve average market returns. But in any diversified portfolio of stocks, you'll see some that fall short of the average. Unfortunately for shareholders, while the Alfresa Holdings Corporation (TSE:2784) share price is up 20% in the last three years, that falls short of the market return. Looking at more recent returns, the stock is up 20% in a year.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Alfresa Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect 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, Alfresa Holdings achieved compound earnings per share growth of 4.8% per year. In comparison, the 6% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

We know that Alfresa Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Alfresa Holdings will grow revenue in the future.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Alfresa Holdings' TSR for the last 3 years was 32%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Alfresa Holdings shareholders are up 23% for the year (even including dividends). But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 1.3% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Alfresa Holdings better, we need to consider many other factors. Take risks, for example - Alfresa Holdings has 1 warning sign we think you should be aware of.

We will like Alfresa Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies 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.

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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.