Recent 11% pullback isn't enough to hurt long-term NITTAN (TSE:6493) shareholders, they're still up 62% over 5 years

It's been a soft week for NITTAN Corporation (TSE:6493) shares, which are down 11%. On the bright side the share price is up over the last half decade. Unfortunately its return of 36% is below the market return of 95%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 26% decline over the last twelve months.

In light of the stock dropping 11% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

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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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last half decade, NITTAN became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise.

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

This free interactive report on NITTAN's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, NITTAN's TSR for the last 5 years was 62%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that NITTAN shareholders are down 23% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 3.9%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for NITTAN you should know about.

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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.