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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 Nomura Real Estate Holdings, Inc. (TSE:3231) share price is up 47% in the last three years, clearly besting the market return of around 33% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 4.2% in the last year, including dividends.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Nomura Real Estate Holdings
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 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.
During three years of share price growth, Nomura Real Estate Holdings achieved compound earnings per share growth of 15% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 14% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Nomura Real Estate Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Nomura Real Estate Holdings will grow revenue in the future.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Nomura Real Estate Holdings the TSR over the last 3 years was 65%, 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
Nomura Real Estate Holdings shareholders are up 4.2% for the year (even including dividends). But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 11% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Nomura Real Estate Holdings better, we need to consider many other factors. For instance, we've identified 2 warning signs for Nomura Real Estate Holdings (1 is a bit unpleasant) that you should be aware of.