Investors more bullish on LINTEC (TSE:7966) this week as stock ascends 5.0%, despite earnings trending downwards over past three years

Thanks in no small measure to Vanguard founder Jack Bogle, it's easy buy a low cost index fund, which should provide the average market return. But you can make superior returns by picking better-than average stocks. Notably, the LINTEC Corporation (TSE:7966) share price has gained 78% in three years, which is better than the average market return. Also positive was the solid 26% share price increase over the last twelve months.

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

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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. 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.

Over the last three years, LINTEC failed to grow earnings per share, which fell 6.3% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.

It could be that the revenue growth of 5.4% per year is viewed as evidence that LINTEC is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that LINTEC has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on LINTEC

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 LINTEC the TSR over the last 3 years was 97%, 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 good to see that LINTEC has rewarded shareholders with a total shareholder return of 30% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 15% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for LINTEC that you should be aware of.

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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.