Investors who have held Kyowa Kirin (TSE:4151) over the last year have watched its earnings decline along with their investment

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Kyowa Kirin Co., Ltd. (TSE:4151) shareholders over the last year, as the share price declined 22%. That falls noticeably short of the market decline of around 0.8%. Zooming out, the stock is down 20% in the last three years.

The recent uptick of 4.9% could be a positive sign of things to come, so let's take a look at historical fundamentals.

See our latest analysis for Kyowa Kirin

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, Kyowa Kirin had to report a 25% decline in EPS over the last year. This proportional reduction in earnings per share isn't far from the 22% decrease in the share price. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Kyowa Kirin's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 0.8% in the last year, Kyowa Kirin shareholders lost 20% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Kyowa Kirin has 2 warning signs we think you should be aware of.

We will like Kyowa Kirin 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.