NTT DATA Group (TSE:9613) stock performs better than its underlying earnings growth over last five years

Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the NTT DATA Group share price has climbed 94% in five years, easily topping the market return of 56% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 44% in the last year, including dividends.

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

Check out our latest analysis for NTT DATA Group

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years of share price growth, NTT DATA Group achieved compound earnings per share (EPS) growth of 7.8% per year. This EPS growth is slower than the share price growth of 14% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on NTT DATA Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, NTT DATA Group's TSR for the last 5 years was 105%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that NTT DATA Group shareholders have received a total shareholder return of 44% over one year. That's including the dividend. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for NTT DATA Group you should be aware of, and 1 of them is a bit unpleasant.

Of course NTT DATA Group 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.