The five-year returns have been decent for Future Innovation Group (TSE:4392) shareholders despite underlying losses increasing

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Future Innovation Group, Inc. (TSE:4392) share price is up 26% in the last five years, that's less than the market return. Zooming in, the stock is actually down 8.8% in the last year.

Since the stock has added JP¥1.1b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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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 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.

We know that Future Innovation Group has been profitable in the past. 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.

The modest 1.5% dividend yield is unlikely to be propping up the share price. On the other hand, Future Innovation Group's revenue is growing nicely, at a compound rate of 4.0% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Future Innovation Group the TSR over the last 5 years was 41%, 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

Investors in Future Innovation Group had a tough year, with a total loss of 5.7% (including dividends), against a market gain of about 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For example, we've discovered 2 warning signs for Future Innovation Group (1 is potentially serious!) that you should be aware of before investing here.

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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.

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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.