Farcent Enterprise (TPE:1730) Has Gifted Shareholders With A Fantastic 140% Total Return On Their Investment

Passive investing in index funds can generate returns that roughly match the overall market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Farcent Enterprise Co., Ltd (TPE:1730) share price is up 89% in the last five years, slightly above the market return. In stark contrast, the stock price has actually fallen 7.3% in the last year.

View our latest analysis for Farcent Enterprise

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Farcent Enterprise managed to grow its earnings per share at 17% a year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Farcent Enterprise's key metrics by checking this interactive graph of Farcent Enterprise's earnings, revenue and cash flow.

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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Farcent Enterprise the TSR over the last 5 years was 140%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Farcent Enterprise had a tough year, with a total loss of 2.4% (including dividends), against a market gain of about 39%. 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. On the bright side, long term shareholders have made money, with a gain of 19% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Farcent Enterprise (1 doesn't sit too well with us!) that you should be aware of before investing here.

Of course Farcent Enterprise may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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