The past three years for Fortum Oyj (HEL:FORTUM) investors has not been profitable

Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Fortum Oyj (HEL:FORTUM) shareholders have had that experience, with the share price dropping 45% in three years, versus a market decline of about 17%.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Fortum Oyj

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Fortum Oyj became profitable within the last five years. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. However, the weak share price might be related to the fact revenue has been disappearing at a rate of 43% each year, over three years. This could have some investors worried about the longer term growth potential (or lack thereof).

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Fortum Oyj is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Fortum Oyj in this interactive graph of future profit estimates.

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. As it happens, Fortum Oyj's TSR for the last 3 years was -33%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Fortum Oyj shareholders have received a total shareholder return of 31% over one year. That's including the dividend. That certainly beats the loss of about 1.9% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Fortum Oyj better, we need to consider many other factors. Even so, be aware that Fortum Oyj is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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