Sompo Holdings' (TSE:8630) investors will be pleased with their stellar 258% return over the last five years

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. Long term Sompo Holdings, Inc. (TSE:8630) shareholders would be well aware of this, since the stock is up 192% in five years. It's also good to see the share price up 27% over the last quarter.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for Sompo 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.

Over half a decade, Sompo Holdings managed to grow its earnings per share at 30% a year. The EPS growth is more impressive than the yearly share price gain of 24% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 7.38 also suggests market apprehension.

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

It is of course excellent to see how Sompo Holdings has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Sompo Holdings' financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Sompo Holdings the TSR over the last 5 years was 258%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Sompo Holdings has rewarded shareholders with a total shareholder return of 88% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 29%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 example, we've discovered 1 warning sign for Sompo Holdings that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.