Despite lower earnings than five years ago, Torii Pharmaceutical (TSE:4551) investors are up 80% since then

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Torii Pharmaceutical Co., Ltd. (TSE:4551) share price is up 58% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 8.1% in the last year.

Since the long term performance has been good but there's been a recent pullback of 7.2%, let's check if the fundamentals match the share price.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Torii Pharmaceutical's earnings per share are down 29% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

In contrast revenue growth of 7.6% per year is probably viewed as evidence that Torii Pharmaceutical is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Torii Pharmaceutical has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Torii Pharmaceutical will earn in the future (free profit forecasts) .

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Torii Pharmaceutical, it has a TSR of 80% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Torii Pharmaceutical has rewarded shareholders with a total shareholder return of 11% in the last twelve months. That's including the dividend. However, that falls short of the 13% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Torii Pharmaceutical better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Torii Pharmaceutical (of which 1 doesn't sit too well with us!) you should know about.

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.