We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the British American Tobacco (Malaysia) Berhad (KLSE:BAT) share price is a whole 74% lower. That's an unpleasant experience for long term holders.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for British American Tobacco (Malaysia) Berhad

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the five years over which the share price declined, British American Tobacco (Malaysia) Berhad's earnings per share (EPS) dropped by 14% each year. This reduction in EPS is less than the 24% annual reduction in the share price. This implies that the market is more cautious about the business these days.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into British American Tobacco (Malaysia) Berhad's key metrics by checking this interactive graph of British American Tobacco (Malaysia) Berhad's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, British American Tobacco (Malaysia) Berhad's TSR for the last 5 years was -64%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 6.7% in the last year, British American Tobacco (Malaysia) Berhad shareholders lost 14% (even including dividends). 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 10% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Take risks, for example - British American Tobacco (Malaysia) Berhad has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

But note: British American Tobacco (Malaysia) Berhad 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 Malaysian 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.