As YASKAWA Electric (TSE:6506) rallies 4.8% this past week, investors may now be noticing the company's one-year earnings growth

The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by YASKAWA Electric Corporation (TSE:6506) shareholders over the last year, as the share price declined 20%. That contrasts poorly with the market return of 7.3%. At least the damage isn't so bad if you look at the last three years, since the stock is down 11% in that time.

On a more encouraging note the company has added JP¥51b to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

View our latest analysis for YASKAWA Electric

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the unfortunate twelve months during which the YASKAWA Electric share price fell, it actually saw its earnings per share (EPS) improve by 24%. It could be that the share price was previously over-hyped.

It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

With a low yield of 1.6% we doubt that the dividend influences the share price much. On the other hand, we're certainly perturbed by the 4.8% decline in YASKAWA Electric's revenue. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

YASKAWA Electric is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market gained around 7.3% in the last year, YASKAWA Electric shareholders lost 19% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. To that end, you should be aware of the 1 warning sign we've spotted with YASKAWA Electric .

We will like YASKAWA Electric 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.