Advance Create (TSE:8798 investor three-year losses grow to 31% as the stock sheds JP¥1.7b this past week

Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Advance Create Co., Ltd. (TSE:8798) shareholders, since the share price is down 37% in the last three years, falling well short of the market return of around 43%. The more recent news is of little comfort, with the share price down 36% in a year. Shareholders have had an even rougher run lately, with the share price down 36% in the last 90 days.

After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Advance Create

Advance Create isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years, Advance Create's revenue dropped 7.9% per year. That's not what investors generally want to see. The stock has disappointed holders over the last three years, falling 11%, annualized. That makes sense given the lack of either profits or revenue growth. However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.

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

This free interactive report on Advance Create's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Advance Create, it has a TSR of -31% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 14% in the last year, Advance Create shareholders lost 35% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Advance Create better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Advance Create (of which 3 are a bit unpleasant!) you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, 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 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.