Unimicron Technology's (TWSE:3037) 47% CAGR outpaced the company's earnings growth over the same five-year period

For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the Unimicron Technology Corp. (TWSE:3037) share price. It's 501% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. Better yet, the share price has risen 8.0% in the last week. Anyone who held for that rewarding ride would probably be keen to talk about it.

Since the stock has added NT$21b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Unimicron Technology

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Unimicron Technology achieved compound earnings per share (EPS) growth of 39% per year. This EPS growth is reasonably close to the 43% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

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

It might be well worthwhile taking a look at our free report on Unimicron Technology's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Unimicron Technology, it has a TSR of 579% 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

Unimicron Technology provided a TSR of 25% over the last twelve months. But that return falls short of the market. On the bright side, the longer term returns (running at about 47% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Unimicron Technology better, we need to consider many other factors. For instance, we've identified 3 warning signs for Unimicron Technology (1 is a bit unpleasant) that you should be aware of.

But note: Unimicron Technology 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.