Shareholders Of Radiant Opto-Electronics (TPE:6176) Must Be Happy With Their 105% Total Return

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Radiant Opto-Electronics Corporation (TPE:6176), which is up 65%, over three years, soundly beating the market return of 34% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 2.7% in the last year , including dividends .

See our latest analysis for Radiant Opto-Electronics

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...' 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, Radiant Opto-Electronics achieved compound earnings per share growth of 12% per year. This EPS growth is lower than the 18% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Radiant Opto-Electronics' key metrics by checking this interactive graph of Radiant Opto-Electronics's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Radiant Opto-Electronics the TSR over the last 3 years was 105%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Radiant Opto-Electronics shareholders gained a total return of 2.7% during the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 18% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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 2 warning signs for Radiant Opto-Electronics you should be aware of.

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 TW exchanges.

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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.
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