Suncall (TSE:5985 investor three-year losses grow to 33% as the stock sheds JP¥1.1b this past week

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Suncall Corporation (TSE:5985) shareholders, since the share price is down 38% in the last three years, falling well short of the market return of around 43%. And more recent buyers are having a tough time too, with a drop of 36% in the last year. Even worse, it's down 12% in about a month, which isn't fun at all.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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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).

We know that Suncall has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

We note that, in three years, revenue has actually grown at a 6.1% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Suncall further; while we may be missing something on this analysis, there might also be an opportunity.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic .

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Suncall's TSR for the last 3 years was -33%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 0.3% in the twelve months, Suncall shareholders did even worse, losing 36% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 instance, we've identified 4 warning signs for Suncall (3 are a bit unpleasant) that you should be aware of.

But note: Suncall may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.