Did Musashi's (TYO:7521) Share Price Deserve to Gain 23%?

If you buy and hold a stock for many years, you'd hope to be making a profit. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Musashi Co., Ltd. (TYO:7521) share price is up 23% in the last five years, that's less than the market return. Meanwhile, the last twelve months saw the share price rise 1.6%.

Check out our latest analysis for Musashi

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Musashi actually saw its EPS drop 16% per year.

The strong decline in earnings per share suggests the market isn't using EPS to judge the company. Given that EPS is down, but the share price is up, it seems clear the market is focussed on other aspects of the business, at the moment.

The modest 1.2% dividend yield is unlikely to be propping up the share price. We are not particularly impressed by the annual compound revenue growth of 0.08% over five years. So why is the share price up? It's not immediately obvious to us, but a closer look at the company's progress over time might yield answers.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Musashi's TSR for the last 5 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

Musashi shareholders are up 3.1% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 6% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

When trading Musashi or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.