Formosa Laboratories' (TWSE:4746) five-year earnings growth trails the 26% YoY shareholder returns

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Formosa Laboratories, Inc. (TWSE:4746) share price has soared 196% in the last half decade. Most would be very happy with that. And in the last month, the share price has gained 16%.

The past week has proven to be lucrative for Formosa Laboratories investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Formosa Laboratories

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Formosa Laboratories managed to grow its earnings per share at 3.3% a year. This EPS growth is lower than the 24% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 246.44.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Formosa Laboratories' key metrics by checking this interactive graph of Formosa Laboratories's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Formosa Laboratories, it has a TSR of 219% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Formosa Laboratories shareholders are up 12% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 26% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 3 warning signs for Formosa Laboratories that you should be aware of before investing here.

But note: Formosa Laboratories may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.

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