Ceres' (TSE:3696) one-year earnings growth trails the 65% YoY shareholder returns

While Ceres Inc. (TSE:3696) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 10% in the last quarter. But that doesn't change the reality that over twelve months the stock has done really well. After all, the share price is up a market-beating 63% in that time.

Since the stock has added JP¥1.8b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Ceres

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.

Ceres was able to grow EPS by 42% in the last twelve months. The share price gain of 63% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

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

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Ceres the TSR over the last 1 year was 65%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Ceres shareholders have received a total shareholder return of 65% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 2 warning signs with Ceres (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

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.