The 25% return delivered to Sk KakenLtd's (TSE:4628) shareholders actually lagged YoY earnings growth

Diversification is a key tool for dealing with stock price volatility. But if you're going to beat the market overall, you need to have individual stocks that outperform. Sk Kaken Co.,Ltd. (TSE:4628) has done well over the last year, with the stock price up 23% beating the market return of 20% (not including dividends). The longer term returns have not been as good, with the stock price only 15% higher than it was three years ago.

Since it's been a strong week for Sk KakenLtd shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Sk KakenLtd

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 the last year Sk KakenLtd grew its earnings per share (EPS) by 31%. It's fair to say that the share price gain of 23% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Sk KakenLtd as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.66.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Sk KakenLtd's key metrics by checking this interactive graph of Sk KakenLtd's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Sk KakenLtd the TSR over the last 1 year was 25%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Sk KakenLtd shareholders have received a total shareholder return of 25% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.6% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current share price, check how Sk KakenLtd scores on these 3 valuation metrics.

Of course Sk KakenLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com