Daiki Axis (TSE:4245) earnings could turn positive as the stock rose 14% last week

Daiki Axis Co., Ltd. (TSE:4245) Shareholders will be pleased to see that the share price is up 14% in the last week. However, that doesn’t beat the less impressive returns of the past three years. In fact, the share price is down 21% over the past three years, well below the market return.

While last week was more reassuring for shareholders, they are still three years into the red, so let’s see if the underlying business is responsible for the decline.

Check out our latest analysis for Daiki Axis

While markets are a powerful pricing mechanism, share prices reflect not only underlying company performance but also investor sentiment. By comparing earnings per share (EPS) and share price changes over time, we can get a sense of how investor attitudes toward a company have changed over time.

During the three years that the share price fell, Daiki Axis’ earnings per share (EPS) fell by 12% each year. This drop in EPS is worse than the average annual share price decline of 7%. So the market may not be too concerned about the EPS value at the moment – or it may have already priced in some of the decline.

You can see how earnings per share have changed over time in the image below (click on the chart to see the exact values).

Before buying or selling a stock, we always recommend a close examination of the historical growth trends. You can find them here.

What about dividends?

It is important to consider the total return to shareholders as well as the share price return for any given stock. While the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So, for companies that pay a generous dividend, the TSR is often much higher than the share price return. In the case of Daiki Axis, the TSR over the last 3 years is -12%. That exceeds the share price return we mentioned earlier. So the dividends paid by the company have the in total shareholder return.

A different perspective

Daiki Axis shareholders received a total return of 0.6% over the year. However, that was below the market average. On the positive side, the long-term returns (about 1.3% per year, over half a decade) look better. It is quite possible that the company will continue to perform well even if the share price gains start to fade. I find it very interesting to look at the share price as an indicator of company performance over the long term. But to gain real insight, we need to consider other information as well. To that end, you should look at the 4 warning signs we spotted Axis at Daiki (including 3 that shouldn’t be ignored).

We’ll like Daiki Axis better if we see some big insider buying. While we wait, check this out free List of undervalued stocks (mostly small caps) with significant recent insider purchases.

Please note that 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 Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.