If You Had Bought Formosa Electronic Industries (GTSM:8171) Shares Five Years Ago You'd Have Earned 386% Returns

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. For example, the Formosa Electronic Industries Inc. (GTSM:8171) share price is up a whopping 386% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 44% gain in the last three months.

See our latest analysis for Formosa Electronic Industries

Because Formosa Electronic Industries made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

Over the last half decade Formosa Electronic Industries' revenue has actually been trending down at about 55% per year. This is in stark contrast to the strong share price growth of 37%, compound, per year. Obviously, whatever the market is excited about, it's not a track record of revenue growth. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Formosa Electronic Industries' TSR for the last 5 years was 391%, 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 Formosa Electronic Industries shareholders have received a total shareholder return of 356% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 37%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Formosa Electronic Industries better, we need to consider many other factors. Take risks, for example - Formosa Electronic Industries has 2 warning signs we think you should be aware of.

But note: Formosa Electronic Industries may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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This article by Simply Wall St is general in nature. 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.
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