Those who invested in Toyoda Gosei (TSE:7282) three years ago are up 47%

Simply Wall St · 04/15 00:05

By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, the Toyoda Gosei Co., Ltd. (TSE:7282) share price is up 33% in the last three years, clearly besting the market return of around 27% (not including dividends).

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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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.

Toyoda Gosei was able to grow its EPS at 11% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 10% 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 how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
TSE:7282 Earnings Per Share Growth April 15th 2025

This free interactive report on Toyoda Gosei's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Toyoda Gosei the TSR over the last 3 years was 47%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Toyoda Gosei shareholders are down 25% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 8.0%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Toyoda Gosei better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Toyoda Gosei you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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