TIS' (TSE:3626) five-year earnings growth trails the 13% YoY shareholder returns

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the TIS Inc. (TSE:3626) share price is up 71% in the last 5 years, clearly besting the market return of around 58% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 19% in the last year, including dividends.

The past week has proven to be lucrative for TIS investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for TIS

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 five years of share price growth, TIS achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is higher than the 11% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of TIS, it has a TSR of 86% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

TIS shareholders have received returns of 19% over twelve months (even including dividends), which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 13% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. Before deciding if you like the current share price, check how TIS scores on these 3 valuation metrics.

Of course TIS 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.