Shionogi's (TSE:4507) investors will be pleased with their decent 65% return over the last five years

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Shionogi & Co., Ltd. (TSE:4507) has fallen short of that second goal, with a share price rise of 48% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 24% over the last year.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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, Shionogi achieved compound earnings per share (EPS) growth of 9.0% per year. So the EPS growth rate is rather close to the annualized share price gain of 8% per year. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Shionogi has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Shionogi will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Shionogi's TSR for the last 5 years was 65%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Shionogi's TSR for the year was broadly in line with the market average, at 27%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 10%. 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. Before forming an opinion on Shionogi you might want to consider these 3 valuation metrics.

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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.

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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.