Earnings grew faster than the respectable 20% CAGR delivered to Hokuriku Electric Power (TSE:9505) shareholders over the last three years

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, Hokuriku Electric Power Company (TSE:9505) shareholders have seen the share price rise 67% over three years, well in excess of the market return (33%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 33%, including dividends.

Since the long term performance has been good but there's been a recent pullback of 5.6%, let's check if the fundamentals match the share price.

Check out our latest analysis for Hokuriku Electric Power

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.

During three years of share price growth, Hokuriku Electric Power moved from a loss to profitability. So we would expect a higher share price over the period.

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 Hokuriku Electric Power has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Hokuriku Electric Power stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Hokuriku Electric Power, it has a TSR of 71% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Hokuriku Electric Power has rewarded shareholders with a total shareholder return of 33% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Hokuriku Electric Power better, we need to consider many other factors. Take risks, for example - Hokuriku Electric Power has 3 warning signs (and 1 which is concerning) we think you should know about.

Of course Hokuriku Electric Power 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 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.

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