United Arrows (TSE:7606) delivers shareholders decent 11% CAGR over 5 years, surging 12% in the last week alone

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. But United Arrows Ltd. (TSE:7606) has fallen short of that second goal, with a share price rise of 49% over five years, which is below the market return. Unfortunately the share price is down 6.3% in the last year.

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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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.

During the five years of share price growth, United Arrows moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for United Arrows the TSR over the last 5 years was 65%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

United Arrows shareholders are down 3.4% for the year (even including dividends), but the market itself is up 28%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 instance, we've identified 3 warning signs for United Arrows (1 is concerning) that you should be aware of.

We will like United Arrows 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.