The three-year returns for Ricoh Company's (TSE:7752) shareholders have been respectable, yet its earnings growth was even better

By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Ricoh Company, Ltd. (TSE:7752), which is up 65%, over three years, soundly beating the market return of 31% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 46%, including dividends.

Since it's been a strong week for Ricoh Company shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Ricoh Company

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 three years of share price growth, Ricoh Company achieved compound earnings per share growth of 319% per year. The average annual share price increase of 18% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

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

It is of course excellent to see how Ricoh Company has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Ricoh Company the TSR over the last 3 years was 80%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Ricoh Company has rewarded shareholders with a total shareholder return of 46% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 11% 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. It's always interesting to track share price performance over the longer term. But to understand Ricoh Company better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Ricoh Company you should be aware of.

We will like Ricoh Company 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.