Unimicron Technology's (TWSE:3037) earnings growth rate lags the 32% CAGR delivered to shareholders

While Unimicron Technology Corp. (TWSE:3037) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 12% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. Indeed, the share price is up an impressive 257% in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Although Unimicron Technology has shed NT$9.1b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Unimicron Technology

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, Unimicron Technology achieved compound earnings per share (EPS) growth of 28% per year. That makes the EPS growth particularly close to the yearly share price growth of 29%. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.

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

Dive deeper into Unimicron Technology's key metrics by checking this interactive graph of Unimicron Technology'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. In the case of Unimicron Technology, it has a TSR of 302% 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

Unimicron Technology shareholders gained a total return of 14% during the year. But that was short of the market average. 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 32% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Take risks, for example - Unimicron Technology has 4 warning signs (and 1 which can't be ignored) we think you should know about.

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