Darfon Electronics' (TWSE:8163) one-year earnings growth trails the 57% YoY shareholder returns

Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Darfon Electronics Corp. (TWSE:8163) share price is up 47% in the last 1 year, clearly besting the market return of around 22% (not including dividends). So that should have shareholders smiling. Also impressive, the stock is up 34% over three years, making long term shareholders happy, too.

Since the stock has added NT$2.2b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Darfon Electronics

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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last year Darfon Electronics grew its earnings per share (EPS) by 44%. We note that the earnings per share growth isn't far from the share price growth (of 47%). So this implies that investor expectations of the company have remained pretty steady. We don't think its coincidental that the share price is growing at a similar rate to the earnings per share.

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 Darfon Electronics has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Darfon Electronics, it has a TSR of 57% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Darfon Electronics shareholders have received a total shareholder return of 57% over the last year. That's including the dividend. That's better than the annualised return of 12% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - Darfon Electronics has 3 warning signs (and 1 which is significant) we think you should know about.

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 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.