Should Mitsuchi (TYO:3439) Be Disappointed With Their 17% Profit?

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Mitsuchi Corporation (TYO:3439), which is up 17%, over three years, soundly beating the market return of 0.6% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 2.2% , including dividends .

View our latest analysis for Mitsuchi

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.

Over the last three years, Mitsuchi failed to grow earnings per share, which fell 64% (annualized).

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Therefore, we think it's worth considering other metrics as well.

The modest 0.4% dividend yield is unlikely to be propping up the share price. The revenue drop of 3.3% is as underwhelming as some politicians. The only thing that's clear is there is low correlation between Mitsuchi's share price and its historic fundamental data. Further research may be required!

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

If you are thinking of buying or selling Mitsuchi stock, you should check out this FREE detailed report on its balance sheet.

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. We note that for Mitsuchi the TSR over the last 3 years was 26%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Mitsuchi shareholders gained a total return of 2.2% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 4% per year for 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 Mitsuchi better, we need to consider many other factors. For example, we've discovered 3 warning signs for Mitsuchi (2 are significant!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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This article by Simply Wall St is general in nature. 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.
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