Nomura Research Institute (TSE:4307) stock performs better than its underlying earnings growth over last five years

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Nomura Research Institute, Ltd. (TSE:4307) shareholders would be well aware of this, since the stock is up 133% in five years. Also pleasing for shareholders was the 17% gain in the last three months.

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 Nomura Research Institute

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.

Over half a decade, Nomura Research Institute managed to grow its earnings per share at 14% a year. This EPS growth is slower than the share price growth of 18% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

We know that Nomura Research Institute has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Nomura Research Institute, it has a TSR of 148% for the last 5 years. 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 Nomura Research Institute shareholders have received a total shareholder return of 22% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 20%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Is Nomura Research Institute cheap compared to other companies? These 3 valuation measures might help you decide.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.