Investors in H.I.S (TSE:9603) from three years ago are still down 28%, even after 10% gain this past week

H.I.S. Co., Ltd. (TSE:9603) shareholders should be happy to see the share price up 17% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 28% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

On a more encouraging note the company has added JP¥12b to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

H.I.S became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

With a rather small yield of just 0.6% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 41% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating H.I.S further; while we may be missing something on this analysis, there might also be an opportunity.

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 H.I.S has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market lost about 0.3% in the twelve months, H.I.S shareholders did even worse, losing 14% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 2 warning signs for H.I.S (1 can't be ignored!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.