Taiyo Yuden (TSE:6976) earnings and shareholder returns have been trending downwards for the last three years, but the stock grows 7.0% this past week

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Taiyo Yuden Co., Ltd. (TSE:6976) have had an unfortunate run in the last three years. So they might be feeling emotional about the 57% share price collapse, in that time. And more recent buyers are having a tough time too, with a drop of 39% in the last year. More recently, the share price has dropped a further 17% in a month.

The recent uptick of 7.0% could be a positive sign of things to come, so let's take a look at historical fundamentals.

We've discovered 2 warning signs about Taiyo Yuden. View them for free.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During the three years that the share price fell, Taiyo Yuden's earnings per share (EPS) dropped by 37% each year. In comparison the 24% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Taiyo Yuden has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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 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. As it happens, Taiyo Yuden's TSR for the last 3 years was -53%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Investors in Taiyo Yuden had a tough year, with a total loss of 37% (including dividends), against a market gain of about 0.06%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. 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. For example, we've discovered 2 warning signs for Taiyo Yuden (1 is a bit unpleasant!) that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.