Investors in Gunosy (TSE:6047) from a year ago are still down 9.0%, even after 21% gain this past week

It is a pleasure to report that the Gunosy Inc. (TSE:6047) is up 36% in the last quarter. But that is minimal compensation for the share price under-performance over the last year. In fact, the price has declined 12% in a year, falling short of the returns you could get by investing in an index fund.

Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Gunosy managed to increase earnings per share from a loss to a profit, over the last 12 months.

Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. So it makes sense to check out some other factors.

On the other hand, we're certainly perturbed by the 17% decline in Gunosy's revenue. If the market sees the weak revenue as jeopardising EPS, that could explain the lower share price.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Gunosy has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Gunosy in this interactive graph of future profit estimates.

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 Gunosy the TSR over the last 1 year was -9.0%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Gunosy shareholders are down 9.0% for the year (even including dividends), but the market itself is up 0.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.2% per year over five years. 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. 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. Take risks, for example - Gunosy has 1 warning sign we think you should be aware of.

Of course Gunosy 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.