Hennge K.K's (TSE:4475) three-year total shareholder returns outpace the underlying earnings growth

Hennge K.K. (TSE:4475) shareholders have seen the share price descend 15% over the month. But that doesn't change the fact that the returns over the last three years have been respectable. It beat the market return of 70% in that time, gaining 73%.

Since the long term performance has been good but there's been a recent pullback of 11%, let's check if the fundamentals match the share price.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Hennge K.K was able to grow its EPS at 45% per year over three years, sending the share price higher. This EPS growth is higher than the 20% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

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

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

A Different Perspective

It's nice to see that Hennge K.K shareholders have received a total shareholder return of 43% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 10% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the 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 example, we've discovered 1 warning sign for Hennge K.K that you should be aware of before investing here.

We will like Hennge K.K 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.