Internet Initiative Japan (TSE:3774) jumps 3.0% this week, though earnings growth is still tracking behind five-year shareholder returns

Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. For example, the Internet Initiative Japan Inc. (TSE:3774) share price is up a whopping 362% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. And in the last week the share price has popped 3.0%.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Internet Initiative Japan

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Internet Initiative Japan achieved compound earnings per share (EPS) growth of 42% per year. So the EPS growth rate is rather close to the annualized share price gain of 36% per year. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Internet Initiative Japan the TSR over the last 5 years was 390%, 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 nice to see that Internet Initiative Japan shareholders have received a total shareholder return of 15% over the last year. And that does include the dividend. Having said that, the five-year TSR of 37% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before deciding if you like the current share price, check how Internet Initiative Japan scores on these 3 valuation metrics.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.