As Hisamitsu Pharmaceutical (TSE:4530) rallies 3.6% this past week, investors may now be noticing the company's one-year earnings growth

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Hisamitsu Pharmaceutical Co., Inc. (TSE:4530) shareholders over the last year, as the share price declined 23%. That's disappointing when you consider the market returned 20%. At least the damage isn't so bad if you look at the last three years, since the stock is down 3.2% in that time.

While the last year has been tough for Hisamitsu Pharmaceutical shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for Hisamitsu Pharmaceutical

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).

During the unfortunate twelve months during which the Hisamitsu Pharmaceutical share price fell, it actually saw its earnings per share (EPS) improve by 7.4%. Of course, the situation might betray previous over-optimism about growth.

The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.

Hisamitsu Pharmaceutical managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

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

This free interactive report on Hisamitsu Pharmaceutical's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 20% in the last year, Hisamitsu Pharmaceutical shareholders lost 22% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.5% 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. 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. For instance, we've identified 1 warning sign for Hisamitsu Pharmaceutical that you should be aware of.

We will like Hisamitsu Pharmaceutical 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.