Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Maruhachi Securities Co., Ltd. (TYO:8700), since the last five years saw the share price fall 49%.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During five years of share price growth, Maruhachi Securities moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
Arguably, the revenue drop of 5.0% a year for half a decade suggests that the company can't grow in the long term. This has probably encouraged some shareholders to sell down the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
If you are thinking of buying or selling Maruhachi Securities stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We've already covered Maruhachi Securities's share price action, but we should also mention its total shareholder return (TSR). 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. Dividends have been really beneficial for Maruhachi Securities shareholders, and that cash payout explains why its total shareholder loss of 42%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
Investors in Maruhachi Securities had a tough year, with a total loss of 1.0%, against a market gain of about 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 10% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Maruhachi Securities better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Maruhachi Securities (including 1 which is is significant) .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on JP exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
If you decide to trade Maruhachi Securities, use the lowest-cost* platform that is rated #1 Overall by Barron's, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.