While shareholders of Sanyo Shokai (TSE:8011) are in the black over 3 years, those who bought a week ago aren't so fortunate

Sanyo Shokai Ltd. (TSE:8011) shareholders might understandably be very concerned that the share price has dropped 30% in the last quarter. But in three years the returns have been great. The share price marched upwards over that time, and is now 148% higher than it was. After a run like that some may not be surprised to see prices moderate. If the business can perform well for years to come, then the recent drop could be an opportunity.

Since the long term performance has been good but there's been a recent pullback of 20%, let's check if the fundamentals match the share price.

See our latest analysis for Sanyo Shokai

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Sanyo Shokai became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Sanyo Shokai the TSR over the last 3 years was 167%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Sanyo Shokai has rewarded shareholders with a total shareholder return of 8.6% in the last twelve months. That's including the dividend. However, the TSR over five years, coming in at 9% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Sanyo Shokai better, we need to consider many other factors. Even so, be aware that Sanyo Shokai is showing 1 warning sign in our investment analysis , you should know about...

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.

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