Fujitsu General's (TSE:6755) one-year decline in earnings translates into losses for shareholders

It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Fujitsu General Limited (TSE:6755) shareholders over the last year, as the share price declined 31%. That contrasts poorly with the market return of 17%. Even if shareholders bought some time ago, they wouldn't be particularly happy: the stock is down 30% in three years. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

While the stock has risen 6.7% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Fujitsu General

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Unhappily, Fujitsu General had to report a 95% decline in EPS over the last year. This fall in the EPS is significantly worse than the 31% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. Indeed, with a P/E ratio of 472.96 there is obviously some real optimism that earnings will bounce back.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

A Different Perspective

While the broader market gained around 17% in the last year, Fujitsu General shareholders lost 30% (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 3%, 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. 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 example, we've discovered 3 warning signs for Fujitsu General that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.