Investors more bullish on Moriroku Company (TSE:4249) this week as stock soars 12%, despite earnings trending downwards over past five years

Simply Wall St · 3d ago

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Moriroku Company, Ltd. (TSE:4249) share price is up 47% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 23% in that time.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

We've discovered 3 warning signs about Moriroku Company. View them for free.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Moriroku Company's earnings per share are down 32% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We note that the dividend has not increased, so that doesn't seem to explain the increase, either. The revenue decline of 2.8% wouldn't have helped. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
TSE:4249 Earnings and Revenue Growth April 15th 2025

Take a more thorough look at Moriroku Company's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Moriroku Company the TSR over the last 5 years was 82%, 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

We regret to report that Moriroku Company shareholders are down 19% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 6.9%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 13%, 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 Moriroku Company better, we need to consider many other factors. For instance, we've identified 3 warning signs for Moriroku Company that you should be aware of.

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