Despite shrinking by JP¥18b in the past week, Kyushu Railway (TSE:9142) shareholders are still up 54% over 3 years

Thanks in no small measure to Vanguard founder Jack Bogle, it's easy buy a low cost index fund, which should provide the average market return. But if you pick the right individual stocks, you could make more than that. To wit, Kyushu Railway Company (TSE:9142) shares are up 40% in three years, besting the market return. More recently the stock has gained 9.8% in a year, which isn't too bad.

In light of the stock dropping 3.2% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

View our latest analysis for Kyushu Railway

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Kyushu Railway became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Kyushu Railway has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Kyushu Railway's balance sheet strength 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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Kyushu Railway, it has a TSR of 54% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Kyushu Railway shareholders are up 13% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Even so, be aware that Kyushu Railway is showing 3 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.