Investing in Taiheiyo Cement (TSE:5233) three years ago would have delivered you a 76% gain

By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Taiheiyo Cement Corporation (TSE:5233), which is up 62%, over three years, soundly beating the market return of 33% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 39% in the last year, including dividends.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Check out our latest analysis for Taiheiyo Cement

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Taiheiyo Cement became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Taiheiyo Cement 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Taiheiyo Cement the TSR over the last 3 years was 76%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Taiheiyo Cement shareholders have received a total shareholder return of 39% over the last year. Of course, that includes the dividend. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Taiheiyo Cement , and understanding them should be part of your investment process.

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.

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

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.