Investors in Daicel (TSE:4202) have seen favorable returns of 71% over the past three years

It hasn't been the best quarter for Daicel Corporation (TSE:4202) shareholders, since the share price has fallen 13% in that time. But over three years, the returns would have left most investors smiling In the last three years the share price is up, 52%: better than the market.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Daicel

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...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Daicel achieved compound earnings per share growth of 26% per year. The average annual share price increase of 15% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. We'd venture the lowish P/E ratio of 6.43 also reflects the negative sentiment around the stock.

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

We know that Daicel has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Daicel the TSR over the last 3 years was 71%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Daicel shareholders gained a total return of 13% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Daicel better, we need to consider many other factors. For example, we've discovered 2 warning signs for Daicel that you should be aware of before investing here.

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.