Investors in Far EasTone Telecommunications (TWSE:4904) have seen respectable returns of 43% over the past three years

Thanks in no small measure to Vanguard founder Jack Bogle, it's easy buy a low cost index fund, which should provide the average market return. But you can make better returns by buying undervalued shares. For example, the Far EasTone Telecommunications Co., Ltd. (TWSE:4904) share price is up 25% in the last three years, slightly above the market return. Zooming in, the stock is up just 3.0% in the last year.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Far EasTone Telecommunications

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Far EasTone Telecommunications achieved compound earnings per share growth of 6.6% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 8% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Au contraire, the share price change has arguably mimicked the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Far EasTone Telecommunications has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Far EasTone Telecommunications the TSR over the last 3 years was 43%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Far EasTone Telecommunications provided a TSR of 7.6% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 6% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Far EasTone Telecommunications better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Far EasTone Telecommunications you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.