The one-year underlying earnings growth at Goldwin (TSE:8111) is promising, but the shareholders are still in the red over that time

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Goldwin Inc. (TSE:8111) share price is down 30% in the last year. That's disappointing when you consider the market returned 7.3%. The silver lining (for longer term investors) is that the stock is still 3.4% higher than it was three years ago. Furthermore, it's down 11% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 5.4% decline in the broader market, throughout the period.

If the past week is anything to go by, investor sentiment for Goldwin isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Goldwin

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).

During the unfortunate twelve months during which the Goldwin share price fell, it actually saw its earnings per share (EPS) improve by 13%. 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. So it's well worth checking out some other metrics, too.

Goldwin's revenue is actually up 9.6% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Goldwin has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Goldwin stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Investors in Goldwin had a tough year, with a total loss of 29% (including dividends), against a market gain of about 7.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Goldwin is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.