The total return for Supreme Electronics (TWSE:8112) investors has risen faster than earnings growth over the last five years

Supreme Electronics Co., Ltd. (TWSE:8112) shareholders might be concerned after seeing the share price drop 12% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 116% the gain in that time. To some, the recent pullback wouldn't be surprising after such a fast rise. The more important question is whether the stock is too cheap or too expensive today.

Although Supreme Electronics has shed NT$1.7b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Supreme 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...' 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, Supreme Electronics achieved compound earnings per share (EPS) growth of 7.1% per year. This EPS growth is lower than the 17% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. 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).

Dive deeper into Supreme Electronics' key metrics by checking this interactive graph of Supreme Electronics'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Supreme Electronics' TSR for the last 5 years was 242%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Supreme Electronics shareholders are up 27% for the year (even including dividends). Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 28% per year for 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Supreme Electronics (of which 2 make us uncomfortable!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.