Mitsubishi Logistics (TSE:9301) jumps 5.0% this week, though earnings growth is still tracking behind five-year shareholder returns

While Mitsubishi Logistics Corporation (TSE:9301) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 10% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 120% return, over that period. To some, the recent pullback wouldn't be surprising after such a fast rise. The more important question is whether the stock is too cheap or too expensive today.

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.

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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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Mitsubishi Logistics achieved compound earnings per share (EPS) growth of 28% per year. This EPS growth is higher than the 17% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 10.57 also suggests market apprehension.

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

We know that Mitsubishi Logistics has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Mitsubishi Logistics' TSR for the last 5 years was 150%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Mitsubishi Logistics shareholders are down 2.0% for the year (even including dividends), but the market itself is up 0.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 20% 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. It's always interesting to track share price performance over the longer term. But to understand Mitsubishi Logistics better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Mitsubishi Logistics (of which 1 is a bit concerning!) you should know about.

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.