The five-year loss for Casio ComputerLtd (TSE:6952) shareholders likely driven by its shrinking earnings

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Casio Computer Co.,Ltd. (TSE:6952) shareholders for doubting their decision to hold, with the stock down 36% over a half decade. The falls have accelerated recently, with the share price down 12% in the last three months. Of course, this share price action may well have been influenced by the 8.2% decline in the broader market, throughout the period.

The recent uptick of 5.4% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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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. 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.

Looking back five years, both Casio ComputerLtd's share price and EPS declined; the latter at a rate of 23% per year. The share price decline of 8% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.

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 Casio ComputerLtd'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Casio ComputerLtd's TSR for the last 5 years was -25%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Casio ComputerLtd shareholders are down 14% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 8.0%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. For example, we've discovered 3 warning signs for Casio ComputerLtd that you should be aware of before investing here.

But note: Casio ComputerLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.