Visual Photonics Epitaxy's (TWSE:2455) 18% CAGR outpaced the company's earnings growth over the same five-year period

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But Visual Photonics Epitaxy Co., Ltd. (TWSE:2455) has fallen short of that second goal, with a share price rise of 100% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 29% in the last year.

Since the stock has added NT$3.3b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Visual Photonics Epitaxy

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Visual Photonics Epitaxy achieved compound earnings per share (EPS) growth of 11% per year. This EPS growth is lower than the 15% average annual increase in the share price. 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. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 46.41.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Visual Photonics Epitaxy has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Visual Photonics Epitaxy will grow revenue in the future.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Visual Photonics Epitaxy, it has a TSR of 132% 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

Visual Photonics Epitaxy's TSR for the year was broadly in line with the market average, at 31%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 18%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. Before forming an opinion on Visual Photonics Epitaxy you might want to consider these 3 valuation metrics.

Of course Visual Photonics Epitaxy 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 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