Shareholders of West Holdings (TYO:1407) Must Be Delighted With Their 853% Total Return

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held West Holdings Corporation (TYO:1407) shares for the last five years, while they gained 690%. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 65% over the last quarter.

It really delights us to see such great share price performance for investors.

Check out our latest analysis for West Holdings

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. 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.

Over half a decade, West Holdings managed to grow its earnings per share at 7.4% a year. This EPS growth is slower than the share price growth of 51% 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 graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how West Holdings has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at West Holdings' financial health with this free report on its balance sheet.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, West Holdings' TSR for the last 5 years was 853%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that West Holdings shareholders have received a total shareholder return of 230% over the last year. That's including the dividend. That's better than the annualised return of 57% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that West Holdings is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

Of course West Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on JP exchanges.

If you’re looking to trade West Holdings, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.