Dowa Holdings' (TSE:5714) 9.4% CAGR outpaced the company's earnings growth over the same five-year period

It hasn't been the best quarter for Dowa Holdings Co., Ltd. (TSE:5714) shareholders, since the share price has fallen 11% in that time. But the silver lining is the stock is up over five years. In that time, it is up 37%, which isn't bad, but is below the market return of 77%.

The past week has proven to be lucrative for Dowa Holdings investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Dowa Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Dowa Holdings managed to grow its earnings per share at 18% a year. The EPS growth is more impressive than the yearly share price gain of 7% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.68.

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

We know that Dowa Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Dowa Holdings will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Dowa Holdings, it has a TSR of 56% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Dowa Holdings shareholders gained a total return of 8.5% during the year. But that was short of the market average. On the bright side, the longer term returns (running at about 9% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before forming an opinion on Dowa Holdings 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.