Shareholders of Yageo (TPE:2327) Must Be Delighted With Their 985% Total Return

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Yageo Corporation (TPE:2327) shares for the last five years, while they gained 654%. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 29% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 13% in 90 days).

Anyone who held for that rewarding ride would probably be keen to talk about it.

View our latest analysis for Yageo

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

During five years of share price growth, Yageo achieved compound earnings per share (EPS) growth of 22% per year. This EPS growth is lower than the 50% 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.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Yageo has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Yageo's financial health with this free 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). 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. In the case of Yageo, it has a TSR of 985% for the last 5 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

We're pleased to report that Yageo shareholders have received a total shareholder return of 53% over one year. And that does include the dividend. However, the TSR over five years, coming in at 61% per year, is even more impressive. 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. Case in point: We've spotted 4 warning signs for Yageo you should be aware of, and 1 of them makes us a bit uncomfortable.

For those who like to find winning investments this free list of growing 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 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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