Tanaka Seimitsu Kogyo's (TYO:7218) Shareholders Are Down 36% On Their Shares

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Tanaka Seimitsu Kogyo Co., Ltd. (TYO:7218) shareholders, since the share price is down 36% in the last three years, falling well short of the market decline of around 6.6%. The more recent news is of little comfort, with the share price down 31% in a year.

View our latest analysis for Tanaka Seimitsu Kogyo

Tanaka Seimitsu Kogyo isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years Tanaka Seimitsu Kogyo saw its revenue shrink by 12% per year. That's not what investors generally want to see. The stock has disappointed holders over the last three years, falling 11%, annualized. And with no profits, and weak revenue, are you surprised? Of course, sentiment could become too negative, and the company may actually be making progress to profitability.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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

A Different Perspective

Investors in Tanaka Seimitsu Kogyo had a tough year, with a total loss of 31%, against a market gain of about 13%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Tanaka Seimitsu Kogyo (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Of course Tanaka Seimitsu Kogyo 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 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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