We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. For example the Maruhachi Securities Co., Ltd. (TYO:8700) share price dropped 62% over five years. That's not a lot of fun for true believers. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days. But this could be related to the weak market, which is down 13% in the same period.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 over which the share price declined, Maruhachi Securities's earnings per share (EPS) dropped by 32% each year. The share price decline of 18% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Maruhachi Securities's key metrics by checking this interactive graph of Maruhachi Securities's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Maruhachi Securities's total shareholder return (TSR) and its 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. Its history of dividend payouts mean that Maruhachi Securities's TSR, which was a 56% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
While the broader market lost about 7.3% in the twelve months, Maruhachi Securities shareholders did even worse, losing 19%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 15% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Case in point: We've spotted 4 warning signs for Maruhachi Securities you should be aware of, and 1 of them can't be ignored.
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 JP exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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