Macbee Planet's (TSE:7095) five-year earnings growth trails the incredible shareholder returns

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. For example, the Macbee Planet, Inc. (TSE:7095) share price is up a whopping 341% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. It's also up 15% in about a month.

Since the stock has added JP¥5.3b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Macbee Planet managed to grow its earnings per share at 31% a year. This EPS growth is reasonably close to the 35% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

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

We know that Macbee Planet has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. As it happens, Macbee Planet's TSR for the last 5 years was 348%, 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

Macbee Planet shareholders are down 10% for the year (even including dividends), but the market itself is up 6.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 35%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Macbee Planet better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Macbee Planet .

We will like Macbee Planet better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.