Those who invested in Mitsui Fudosan (TSE:8801) three years ago are up 78%

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, the Mitsui Fudosan Co., Ltd. (TSE:8801) share price is up 67% in the last three years, clearly besting the market return of around 37% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 11%, including dividends.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Mitsui Fudosan

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

Over the last three years, Mitsui Fudosan failed to grow earnings per share, which fell 2.7% (annualized).

Based on these numbers, we think that the decline in earnings per share may not be a good representation of how the business has changed over the years. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It could be that the revenue growth of 5.0% per year is viewed as evidence that Mitsui Fudosan is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Mitsui Fudosan is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Mitsui Fudosan in this interactive graph of future profit estimates.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Mitsui Fudosan, it has a TSR of 78% for the last 3 years. That exceeds its share price return that we previously mentioned. 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 11% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Mitsui Fudosan (of which 1 is potentially serious!) you should know about.

We will like Mitsui Fudosan better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.