Hisamitsu Pharmaceutical's (TSE:4530) 11% YoY earnings expansion surpassed the shareholder returns over the past three years

Investors can buy low cost index fund if they want to receive the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. That's what has happened with the Hisamitsu Pharmaceutical Co., Inc. (TSE:4530) share price. It's up 23% over three years, but that is below the market return. Looking at more recent returns, the stock is up 18% in a year.

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

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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...' 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.

During three years of share price growth, Hisamitsu Pharmaceutical achieved compound earnings per share growth of 36% per year. This EPS growth is higher than the 7% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Hisamitsu Pharmaceutical has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Hisamitsu Pharmaceutical's financial health with this free report on its balance sheet.

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, Hisamitsu Pharmaceutical's TSR for the last 3 years was 31%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Hisamitsu Pharmaceutical has rewarded shareholders with a total shareholder return of 20% in the last twelve months. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 0.7% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Hisamitsu Pharmaceutical you should know about.

Of course Hisamitsu Pharmaceutical may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.