Densan System Holdings (TSE:4072) sheds JP¥3.2b, company earnings and investor returns have been trending downwards for past year

It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Densan System Holdings Co., Ltd. (TSE:4072) shareholders over the last year, as the share price declined 13%. That contrasts poorly with the market decline of 3.9%. Looking at the longer term, the stock is down 11% over three years. On top of that, the share price is down 11% in the last week. But this could be related to the soft market, which is down about 8.3% in the same period.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Unhappily, Densan System Holdings had to report a 7.4% decline in EPS over the last year. The share price decline of 13% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders more nervous about the business.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here .

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Densan System Holdings the TSR over the last 1 year was -11%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Densan System Holdings shareholders are down 11% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 3.9%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Importantly, we haven't analysed Densan System Holdings' dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

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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.