Investing in Uni-President Enterprises (TWSE:1216) three years ago would have delivered you a 44% gain

Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the Uni-President Enterprises Corp. (TWSE:1216) share price is up 28% in the last three years, that falls short of the market return. On the other hand, the more recent gain of 27% over a year is certainly pleasing.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Uni-President Enterprises

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.

Over the last three years, Uni-President Enterprises failed to grow earnings per share, which fell 4.7% (annualized).

Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Uni-President Enterprises at the moment. So other metrics may hold the key to understanding what is influencing investors.

It could be that the revenue growth of 11% per year is viewed as evidence that Uni-President Enterprises is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Uni-President Enterprises is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Uni-President Enterprises in this interactive graph of future profit estimates.

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. In the case of Uni-President Enterprises, it has a TSR of 44% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Uni-President Enterprises provided a TSR of 31% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 8% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Case in point: We've spotted 1 warning sign for Uni-President Enterprises you should be aware of.

For those who like to find winning investments this free list of undervalued 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 Taiwanese 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.