AEON Financial Service (TSE:8570) shareholders have lost 7.7% over 5 years, earnings decline likely the culprit

The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term AEON Financial Service Co., Ltd. (TSE:8570) shareholders for doubting their decision to hold, with the stock down 24% over a half decade.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for AEON Financial Service

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, AEON Financial Service's earnings per share (EPS) dropped by 9.8% each year. This fall in the EPS is worse than the 5% compound annual share price fall. 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).

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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for AEON Financial Service the TSR over the last 5 years was -7.7%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

AEON Financial Service shareholders gained a total return of 6.3% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 1.5% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand AEON Financial Service better, we need to consider many other factors. Take risks, for example - AEON Financial Service has 1 warning sign we think you should be aware of.

But note: AEON Financial Service may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.