Ryohin Keikaku (TSE:7453) jumps 4.0% this week, though earnings growth is still tracking behind three-year shareholder returns

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Ryohin Keikaku Co., Ltd. (TSE:7453), which is up 38%, over three years, soundly beating the market return of 27% (not including dividends).

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Ryohin Keikaku

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

During three years of share price growth, Ryohin Keikaku achieved compound earnings per share growth of 6.8% per year. In comparison, the 11% per year gain in the share price outpaces the EPS growth. 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 company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Ryohin Keikaku has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Ryohin Keikaku will grow revenue in the future.

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. We note that for Ryohin Keikaku 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

We're pleased to report that Ryohin Keikaku shareholders have received a total shareholder return of 36% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before deciding if you like the current share price, check how Ryohin Keikaku scores on these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.