Tokyu Fudosan Holdings (TSE:3289) shareholders have earned a 18% CAGR over the last five years

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Tokyu Fudosan Holdings share price has climbed 95% in five years, easily topping the market return of 77% (ignoring dividends).

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During five years of share price growth, Tokyu Fudosan Holdings achieved compound earnings per share (EPS) growth of 16% per year. So the EPS growth rate is rather close to the annualized share price gain of 14% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

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

We know that Tokyu Fudosan Holdings has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Tokyu Fudosan Holdings the TSR over the last 5 years was 126%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Tokyu Fudosan Holdings shareholders are down 11% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 0.5%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Tokyu Fudosan Holdings better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Tokyu Fudosan Holdings you should be aware of, and 1 of them is a bit unpleasant.

Of course Tokyu Fudosan Holdings 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.

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.