Dentsu Group (TSE:4324) climbs 9.2% this week, taking five-year gains to 33%

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Dentsu Group Inc. (TSE:4324) has fallen short of that second goal, with a share price rise of 14% over five years, which is below the market return. Zooming in, the stock is up just 1.0% in the last year.

Since it's been a strong week for Dentsu Group shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Dentsu Group

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 five years of share price growth, Dentsu Group moved from a loss to profitability. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. So we might find other metrics can better explain the share price movements.

In contrast revenue growth of 6.3% per year is probably viewed as evidence that Dentsu Group is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Dentsu Group's TSR for the last 5 years was 33%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Dentsu Group provided a TSR of 4.5% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 6% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Case in point: We've spotted 1 warning sign for Dentsu Group you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.