Mitsui Fudosan's (TSE:8801) three-year earnings growth trails the solid shareholder returns

By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, Mitsui Fudosan Co., Ltd. (TSE:8801) shareholders have seen the share price rise 100% over three years, well in excess of the market return (35%, not including dividends).

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

View our latest analysis for Mitsui Fudosan

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 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.

Mitsui Fudosan was able to grow its EPS at 7.4% per year over three years, sending the share price higher. This EPS growth is lower than the 26% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

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

This free interactive report on Mitsui Fudosan's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Mitsui Fudosan the TSR over the last 3 years was 113%, 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 Mitsui Fudosan shareholders have received a total shareholder return of 88% over one year. That's including the dividend. That's better than the annualised return of 16% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Mitsui Fudosan better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Mitsui Fudosan you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.