The three-year decline in earnings might be taking its toll on A-One Seimitsu (TSE:6156) shareholders as stock falls 10% over the past week

A-One Seimitsu Inc. (TSE:6156) shareholders might be concerned after seeing the share price drop 17% in the last quarter. In contrast the stock is up over the last three years. Arguably you'd have been better off buying an index fund, because the gain of 33% in three years isn't amazing.

In light of the stock dropping 10% 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 three-year return.

View our latest analysis for A-One Seimitsu

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over the last three years, A-One Seimitsu failed to grow earnings per share, which fell 37% (annualized).

So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.

Interestingly, the dividend has increased over time; so that may have given the share price a boost. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time.

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

Take a more thorough look at A-One Seimitsu's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for A-One Seimitsu the TSR over the last 3 years was 55%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

A-One Seimitsu provided a TSR of 0.8% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 10% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand A-One Seimitsu better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with A-One Seimitsu (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

We will like A-One Seimitsu better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.

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