Shareholders in Toho Zinc (TSE:5707) have lost 68%, as stock drops 23% this past week

Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Toho Zinc Co., Ltd. (TSE:5707) share price dropped 71% in the last half decade. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 65% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 41% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 18% in the same timeframe.

If the past week is anything to go by, investor sentiment for Toho Zinc isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Toho Zinc

Toho Zinc wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, Toho Zinc saw its revenue increase by 7.4% per year. That's a pretty good rate for a long time period. So it is unexpected to see the stock down 11% per year in the last five years. The market can be a harsh master when your company is losing money and revenue growth disappoints.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Toho Zinc'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. Toho Zinc's TSR of was a loss of 68% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 1.5% in the twelve months, Toho Zinc shareholders did even worse, losing 65%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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 Toho Zinc better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Toho Zinc (of which 1 doesn't sit too well with us!) you should know about.

We will like Toho Zinc better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com