Kasumigaseki CapitalLtd's (TSE:3498) 76% CAGR outpaced the company's earnings growth over the same three-year period

It hasn't been the best quarter for Kasumigaseki Capital Co.,Ltd. (TSE:3498) shareholders, since the share price has fallen 28% in that time. But over three years the performance has been really wonderful. Indeed, the share price is up a whopping 428% in that time. As long term investors the recent fall doesn't detract all that much from the longer term story. The share price action could signify that the business itself is dramatically improved, in that time.

Since the stock has added JP¥8.1b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Kasumigaseki CapitalLtd

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

Kasumigaseki CapitalLtd was able to grow its EPS at 61% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 74% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Rather, the share price has approximately tracked EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Kasumigaseki CapitalLtd 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. We note that for Kasumigaseki CapitalLtd the TSR over the last 3 years was 446%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Kasumigaseki CapitalLtd shareholders have received a total shareholder return of 52% over one year. And that does include the dividend. That's better than the annualised return of 39% over half a decade, implying that the company is doing better recently. 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. To that end, you should learn about the 4 warning signs we've spotted with Kasumigaseki CapitalLtd (including 3 which make us uncomfortable) .

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.