AEON Mall's (TSE:8905) investors will be pleased with their 26% return over the last three years

Investors can buy low cost index fund if they want to receive the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. That's what has happened with the AEON Mall Co., Ltd. (TSE:8905) share price. It's up 15% over three years, but that is below the market return. At least the stock price is up over the last year, albeit only by 4.8%.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for AEON Mall

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...' 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, AEON Mall failed to grow earnings per share, which fell 2.2% (annualized).

With EPS falling, but a modestly increasing share price, it seems that the market was probably too pessimistic about the stock in the past. Still, if EPS declines indefinitely, the share price will likely follow (especially if the company makes a loss).

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of AEON Mall, it has a TSR of 26% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

AEON Mall shareholders are up 7.5% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand AEON Mall better, we need to consider many other factors. Even so, be aware that AEON Mall is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.