The one-year decline in earnings for JustSystems TSE:4686) isn't encouraging, but shareholders are still up 42% over that period

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the JustSystems Corporation (TSE:4686) share price is up 41% in the last 1 year, clearly besting the market return of around 1.2% (not including dividends). That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 32% in three years.

In light of the stock dropping 4.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

View our latest analysis for JustSystems

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year, JustSystems actually saw its earnings per share drop 1.7%.

The mild decline in EPS may be a result of the fact that the company is more focused on other aspects of the business, right now. It makes sense to check some of the other fundamental data for an explanation of the share price rise.

We doubt the modest 0.5% dividend yield is doing much to support the share price. However the year on year revenue growth of 4.5% would help. We do see some companies suppress earnings in order to accelerate revenue growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's nice to see that JustSystems shareholders have received a total shareholder return of 42% over the last year. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 5% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before deciding if you like the current share price, check how JustSystems scores on these 3 valuation metrics.

Of course JustSystems may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.