Murata Manufacturing's (TSE:6981) earnings have declined over year, contributing to shareholders 22% loss

It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Murata Manufacturing Co., Ltd. (TSE:6981) share price slid 23% over twelve months. That's disappointing when you consider the market declined 0.5%. Taking the longer term view, the stock fell 20% over the last three years. The falls have accelerated recently, with the share price down 13% in the last three months.

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.

Our free stock report includes 1 warning sign investors should be aware of before investing in Murata Manufacturing. Read for free now.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Unfortunately Murata Manufacturing reported an EPS drop of 3.4% for the last year. This reduction in EPS is not as bad as the 23% share price fall. This suggests the EPS fall has made some shareholders more nervous about the business.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

A Different Perspective

While the broader market gained around 0.5% in the last year, Murata Manufacturing shareholders lost 22% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Murata Manufacturing better, we need to consider many other factors. For example, we've discovered 1 warning sign for Murata Manufacturing 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.