FutureFuel (NYSE:FF) Has Compensated Shareholders With A 34% Return On Their Investment

FutureFuel Corp. (NYSE:FF) shareholders should be happy to see the share price up 15% in the last month. But if you look at the last five years the returns have not been good. After all, the share price is down 21% in that time, significantly under-performing the market.

See our latest analysis for FutureFuel

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the unfortunate half decade during which the share price slipped, FutureFuel actually saw its earnings per share (EPS) improve by 16% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.

It is unusual to see such modest share price growth in the face of sustained EPS improvements. We can look to other metrics to try to understand the situation better.

We don't think that the 1.9% is big factor in the share price, since it's quite small, as dividends go. It could be that the revenue decline of 6.2% per year is viewed as evidence that FutureFuel is shrinking. That could explain the weak share price.

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

Take a more thorough look at FutureFuel's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for FutureFuel the TSR over the last 5 years was 34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that FutureFuel shareholders have received a total shareholder return of 31% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand FutureFuel better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with FutureFuel .

We will like FutureFuel better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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