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Nippon Chemical Industrial (TSE:4092) shareholders notch a 26% CAGR over 3 years, yet earnings have been shrinking

Simply Wall St · 01/08 21:21

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 superior returns by picking better-than average stocks. To wit, Nippon Chemical Industrial Co., Ltd. (TSE:4092) shares are up 81% in three years, besting the market return. It's nice to see the stock price has more recent momentum, too, with a rise of 34% in the last year.

Since it's been a strong week for Nippon Chemical Industrial shareholders, let's have a look at trend of the longer term fundamentals.

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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 the three years of share price growth, Nippon Chemical Industrial actually saw its earnings per share (EPS) drop 2.4% per year.

Given the share price resilience, we don't think the (declining) EPS numbers are a good measure of how the business is moving forward, right now. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We severely doubt anyone is particularly impressed with the modest 2.2% three-year revenue growth rate. So truth be told we can't see an easy explanation for the share price action, but perhaps you can...

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
TSE:4092 Earnings and Revenue Growth January 8th 2026

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Nippon Chemical Industrial's TSR for the last 3 years was 101%, 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 nice to see that Nippon Chemical Industrial shareholders have received a total shareholder return of 39% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Nippon Chemical Industrial better, we need to consider many other factors. Even so, be aware that Nippon Chemical Industrial is showing 3 warning signs in our investment analysis , you should know about...

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