Fast Retailing's (TSE:9983) investors will be pleased with their impressive 116% return over the last three years
It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. To wit, the Fast Retailing Co., Ltd. (TSE:9983) share price has flown 110% in the last three years. That sort of return is as solid as granite. Also pleasing for shareholders was the 18% gain in the last three months. But this could be related to the strong market, which is up 7.6% in the last three months.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Fast Retailing was able to grow its EPS at 17% per year over three years, sending the share price higher. In comparison, the 28% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Fast Retailing has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
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. We note that for Fast Retailing the TSR over the last 3 years was 116%, 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
Fast Retailing shareholders are up 8.4% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 16% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Before forming an opinion on Fast Retailing you might want to consider these 3 valuation metrics.
Of course Fast Retailing may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese 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.