2.0% earnings growth over 5 years has not materialized into gains for Zojirushi (TSE:7965) shareholders over that period

The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Zojirushi Corporation (TSE:7965), since the last five years saw the share price fall 25%. On top of that, the share price is down 9.1% in the last week.

Since Zojirushi has shed JP¥11b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Zojirushi

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During the unfortunate half decade during which the share price slipped, Zojirushi actually saw its earnings per share (EPS) improve by 10% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

In contrast to the share price, revenue has actually increased by 3.0% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

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

We know that Zojirushi has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas 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 a lot higher than the share price return. In the case of Zojirushi, it has a TSR of -17% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Zojirushi shareholders have received returns of 9.9% over twelve months (even including dividends), which isn't far from the general market return. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 3%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for Zojirushi. It's always interesting to track share price performance over the longer term. But to understand Zojirushi better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Zojirushi you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese exchanges.