Investing in Hankyu Hanshin Holdings (TSE:9042) three years ago would have delivered you a 32% gain

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Hankyu Hanshin Holdings, Inc. (TSE:9042) share price is up 28% in the last three years, clearly besting the market return of around 18% (not including dividends).

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Hankyu Hanshin Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Hankyu Hanshin Holdings became profitable within the last three years. So we would expect a higher share price over the period.

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

We know that Hankyu Hanshin Holdings has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Hankyu Hanshin Holdings' TSR for the last 3 years was 32%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Hankyu Hanshin Holdings shareholders are down 17% for the year (even including dividends), but the market itself is up 7.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Hankyu Hanshin Holdings (1 is significant!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.