CHANGE HoldingsInc (TSE:3962) sheds 13% this week, as yearly returns fall more in line with earnings growth

It's been a soft week for CHANGE Holdings,Inc. (TSE:3962) shares, which are down 13%. But at least the stock is up over the last five years. In that time, it is up 46%, which isn't bad, but is below the market return of 87%. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 41% in the last three years.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, CHANGE HoldingsInc managed to grow its earnings per share at 27% a year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for CHANGE HoldingsInc the TSR over the last 5 years was 51%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Although it hurts that CHANGE HoldingsInc returned a loss of 1.4% in the last twelve months, the broader market was actually worse, returning a loss of 5.9%. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand CHANGE HoldingsInc better, we need to consider many other factors. Take risks, for example - CHANGE HoldingsInc has 2 warning signs we think you should be aware of.

We will like CHANGE HoldingsInc 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.