Hanatour Japan (TSE:6561) pulls back 10% this week, but still delivers shareholders decent 7.8% CAGR over 5 years

Hanatour Japan Co., Ltd. (TSE:6561) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But at least the stock is up over the last five years. In that time, it is up 42%, which isn't bad, but is below the market return of 97%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 33% decline over the last twelve months.

Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During the five years of share price growth, Hanatour Japan moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.

You can see below how EPS has changed over time (discover 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Hanatour Japan's TSR for the last 5 years was 46%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Hanatour Japan shareholders are down 31% for the year (even including dividends), but the market itself is up 2.9%. 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 8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Hanatour Japan better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Hanatour Japan (including 1 which is potentially serious) .

We will like Hanatour Japan 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.