The total return for Kakaku.com (TSE:2371) investors has risen faster than earnings growth over the last year

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Kakaku.com, Inc. (TSE:2371) share price is up 30% in the last 1 year, clearly besting the market return of around 1.8% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! In contrast, the longer term returns are negative, since the share price is 1.3% lower than it was three years ago.

Since the long term performance has been good but there's been a recent pullback of 3.2%, let's check if the fundamentals match the share price.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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...' 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.

Kakaku.com was able to grow EPS by 12% in the last twelve months. The share price gain of 30% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Kakaku.com has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst 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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Kakaku.com's TSR for the last 1 year was 34%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Kakaku.com shareholders have received a total shareholder return of 34% over one year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 0.5% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Kakaku.com better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Kakaku.com you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.