MITSUI-SOKO HOLDINGS (TSE:9302) sheds 3.0% this week, as yearly returns fall more in line with earnings growth

We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the MITSUI-SOKO HOLDINGS Co., Ltd. (TSE:9302) share price. It's 652% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 47% in about a quarter. It really delights us to see such great share price performance for investors.

In light of the stock dropping 3.0% 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 five-year return.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, MITSUI-SOKO HOLDINGS managed to grow its earnings per share at 9.4% a year. This EPS growth is slower than the share price growth of 50% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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

Dive deeper into MITSUI-SOKO HOLDINGS' key metrics by checking this interactive graph of MITSUI-SOKO HOLDINGS's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, MITSUI-SOKO HOLDINGS' TSR for the last 5 years was 802%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that MITSUI-SOKO HOLDINGS shareholders have received a total shareholder return of 165% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 55% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Is MITSUI-SOKO HOLDINGS cheap compared to other companies? These 3 valuation measures might help you decide.

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.