In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Reckon Limited (ASX:RKN) shareholders for doubting their decision to hold, with the stock down 58% over a half decade. The silver lining is that the stock is up 3.4% in about a week.

See our latest analysis for Reckon

There is no denying that markets are sometimes efficient, but prices do not always reflect 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, Reckon's earnings per share (EPS) dropped by 12% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 16% per year, over the period. This implies that the market is more cautious about the business these days. The low P/E ratio of 10.98 further reflects this reticence.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Reckon, it has a TSR of -46% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Reckon shareholders gained a total return of 7.1% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 12% per year, over five years. It could well be that the business is stabilizing. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.