116% earnings growth over 1 year has not materialized into gains for Sakata Seed (TSE:1377) shareholders over that period

It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Sakata Seed Corporation (TSE:1377) have tasted that bitter downside in the last year, as the share price dropped 10%. That falls noticeably short of the market decline of around 0.3%. Looking at the longer term, the stock is down 8.5% over three years. On top of that, the share price is down 5.0% in the last week. However, this move may have been influenced by the broader market, which fell 5.5% in that time.

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

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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...' 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 the unfortunate twelve months during which the Sakata Seed share price fell, it actually saw its earnings per share (EPS) improve by 116%. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

Sakata Seed managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Sakata Seed has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time .

A Different Perspective

While the broader market lost about 0.3% in the twelve months, Sakata Seed shareholders did even worse, losing 8.1% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 2% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Sakata Seed (of which 1 shouldn't be ignored!) you should know about.

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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.