Earnings growth outpaced the 24% return delivered to YASKAWA Electric (TSE:6506) shareholders over the last year
There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But not every stock you buy will perform as well as the overall market. Unfortunately for shareholders, while the YASKAWA Electric Corporation (TSE:6506) share price is up 22% in the last year, that falls short of the market return. Having said that, the longer term returns aren't so impressive, with stock gaining just 9.2% in three years.
The past week has proven to be lucrative for YASKAWA Electric investors, so let's see if fundamentals drove the company's one-year performance.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
YASKAWA Electric was able to grow EPS by 30% in the last twelve months. It's fair to say that the share price gain of 22% did not keep pace with the EPS growth. So it seems like the market has cooled on YASKAWA Electric, despite the growth. Interesting.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that YASKAWA Electric 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?
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for YASKAWA Electric the TSR over the last 1 year was 24%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
YASKAWA Electric's TSR for the year was broadly in line with the market average, at 24%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 2% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for YASKAWA Electric (of which 1 is a bit unpleasant!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.