Tokyo Ohka Kogyo's (TSE:4186) five-year total shareholder returns outpace the underlying earnings growth

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Tokyo Ohka Kogyo Co., Ltd. (TSE:4186) which saw its share price drive 136% higher over five years. But it's down 3.5% in the last week. However, this might be related to the overall market decline of 2.3% in a week.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Tokyo Ohka Kogyo

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Tokyo Ohka Kogyo managed to grow its earnings per share at 31% a year. This EPS growth is higher than the 19% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Tokyo Ohka Kogyo has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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 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. We note that for Tokyo Ohka Kogyo the TSR over the last 5 years was 162%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Tokyo Ohka Kogyo has rewarded shareholders with a total shareholder return of 18% in the last twelve months. And that does include the dividend. However, that falls short of the 21% TSR per annum it has made for shareholders, each year, over five years. Before forming an opinion on Tokyo Ohka Kogyo you might want to consider these 3 valuation metrics.

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.