Nitori Holdings (TSE:9843) stock falls 4.0% in past week as one-year earnings and shareholder returns continue downward trend

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Nitori Holdings Co., Ltd. (TSE:9843) share price slid 41% over twelve months. That contrasts poorly with the market return of 17%. On the bright side, the stock is actually up 1.7% in the last three years.

After losing 4.0% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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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.

Unhappily, Nitori Holdings had to report a 6.7% decline in EPS over the last year. This reduction in EPS is not as bad as the 41% share price fall. So it seems the market was too confident about the business, a year ago.

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 Nitori Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Nitori Holdings shareholders are down 40% for the year (even including dividends), but the market itself is up 17%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% 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. Is Nitori Holdings cheap compared to other companies? These 3 valuation measures might help you decide.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.