Investors in NFI Group (TSE:NFI) from five years ago are still down 14%, even after 6.0% gain this past week

For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. So we wouldn't blame long term NFI Group Inc. (TSE:NFI) shareholders for doubting their decision to hold, with the stock down 21% over a half decade. On the other hand the share price has bounced 6.0% over the last week. But this could be related to the strong market, with stocks up around 2.5% in the same time.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

We've discovered 1 warning sign about NFI Group. View them for free.

NFI Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last half decade, NFI Group saw its revenue increase by 1.7% per year. That's not a very high growth rate considering it doesn't make profits. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 4% (annualized) in the same time frame. Investors should consider how bad the losses are, and whether the company can make it to profitability with ease. Shareholders will want the company to approach profitability if it can't grow revenue any faster.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think NFI Group will earn in the future (free profit forecasts).

A Dividend Lost

It's important to keep in mind that we've been talking about the share price returns, which don't include dividends, while the total shareholder return does. In some ways, TSR is a better measure of how well an investment has performed. NFI Group's TSR over the last 5 years is -14%; better than its share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.

A Different Perspective

NFI Group shareholders gained a total return of 5.0% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 3% per year, over five years. It could well be that the business is stabilizing. 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. Even so, be aware that NFI Group is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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