Yodogawa Steel Works (TSE:5451) sheds 5.8% this week, as yearly returns fall more in line with earnings growth

Simply Wall St · 10/15 00:01

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. Long term Yodogawa Steel Works, Ltd. (TSE:5451) shareholders would be well aware of this, since the stock is up 167% in five years. It's down 5.8% in the last seven days.

While the stock has fallen 5.8% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Check out our latest analysis for Yodogawa Steel Works

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Yodogawa Steel Works achieved compound earnings per share (EPS) growth of 1.4% per year. This EPS growth is slower than the share price growth of 22% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
TSE:5451 Earnings Per Share Growth October 15th 2024

It might be well worthwhile taking a look at our free report on Yodogawa Steel Works' 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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Yodogawa Steel Works' TSR for the last 5 years was 226%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Yodogawa Steel Works has rewarded shareholders with a total shareholder return of 64% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 27% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Yodogawa Steel Works , and understanding them should be part of your investment process.

We will like Yodogawa Steel Works better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese exchanges.