If You Had Bought Cosmos Initia's (TYO:8844) Shares Three Years Ago You Would Be Down 49%

For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Cosmos Initia Co., Ltd. (TYO:8844) shareholders, since the share price is down 49% in the last three years, falling well short of the market return of around 17%. It's down 3.9% in the last seven days.

See our latest analysis for Cosmos Initia

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, Cosmos Initia's earnings per share (EPS) dropped by 43% each year. This fall in the EPS is worse than the 20% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

This free interactive report on Cosmos Initia's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Cosmos Initia's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Cosmos Initia's TSR of was a loss of 46% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Investors in Cosmos Initia had a tough year, with a total loss of 5.9%, against a market gain of about 39%. 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 1.3%, 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. It's always interesting to track share price performance over the longer term. But to understand Cosmos Initia better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Cosmos Initia you should be aware of, and 2 of them are a bit concerning.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on JP exchanges.

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This article by Simply Wall St is general in nature. 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.
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