Mitsubishi Estate (TSE:8802) shareholders have earned a 14% CAGR over the last three years

Mitsubishi Estate Co., Ltd. (TSE:8802) shareholders might be concerned after seeing the share price drop 15% in the last quarter. But over the last three years returns have been decent. After all, the stock has performed better than the market (38%) over that time, over which it gained 39%.

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.

See our latest analysis for Mitsubishi Estate

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 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.

Mitsubishi Estate was able to grow its EPS at 9.7% 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 12% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Quite to the contrary, the share price has arguably reflected the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Mitsubishi Estate's key metrics by checking this interactive graph of Mitsubishi Estate's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Mitsubishi Estate the TSR over the last 3 years was 48%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Mitsubishi Estate shareholders have received a total shareholder return of 39% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. 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. For example, we've discovered 1 warning sign for Mitsubishi Estate that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.