WorkmanLtd's (TSE:7564) one-year earnings growth trails the 80% YoY shareholder returns

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Workman Co.,Ltd. (TSE:7564) share price is 77% higher than it was a year ago, much better than the market decline of around 1.4% (not including dividends) in the same period. So that should have shareholders smiling. Having said that, the longer term returns aren't so impressive, with stock gaining just 9.0% in three years.

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

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the last year WorkmanLtd grew its earnings per share (EPS) by 5.7%. This EPS growth is significantly lower than the 77% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of WorkmanLtd, it has a TSR of 80% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that WorkmanLtd shareholders have received a total shareholder return of 80% over the last year. And that does include the dividend. Notably the five-year annualised TSR loss of 5% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. Before forming an opinion on WorkmanLtd you might want to consider these 3 valuation metrics.

Of course WorkmanLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.