ARGO GRAPHICS (TSE:7595) shareholders have earned a 20% CAGR over the last three years

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at ARGO GRAPHICS Inc. (TSE:7595), which is up 64%, over three years, soundly beating the market return of 45% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 17% in the last year, including dividends.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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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.

ARGO GRAPHICS was able to grow its EPS at 27% per year over three years, sending the share price higher. The average annual share price increase of 18% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.65.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, ARGO GRAPHICS' TSR for the last 3 years was 75%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that ARGO GRAPHICS shareholders have received a total shareholder return of 17% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 9%. Therefore it seems like sentiment around the company has been positive lately. 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 forming an opinion on ARGO GRAPHICS you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

We will like ARGO GRAPHICS 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.